Great Deal! Get Instant $10 FREE in Account on First Order + 10% Cashback on Every Order Order Now

Phoenix Motors wants to lock in the cost of 10,000 ounces of platinum to be used in next quarter’s production of catalytic converters. It buys three-month futures contracts for 10,000 ounces at a...

1 answer below »

Phoenix Motors wants to lock in the cost of 10,000 ounces of platinum to be used in next quarter’s production of catalytic converters. It buys three-month futures contracts for 10,000 ounces at a price of $1,250 per ounce.

a. Suppose the spot price of platinum falls to $1,100 in three months’ time. Does Phoenix have a profit or loss on the futures contract? Has it locked in the cost of purchasing the platinum it needs?

b. How do your answers change if the spot price of platinum increases to $1,400 after three months?

Commodity

Spot Price

Futures Price

Comments

Magnoosium

$2,550 per ton

$2,728.50 per ton

Monthly storage cost = monthly convenience yield

Frozen quiche

$.50 per pound

$.514 per pound

Six months’ storage costs = $.10 per

pound; six months’ convenience yield =

$.05 per pound.

Nevada Hydro 8s of 2002

77

78.39

4% semiannual coupon payment is due

just before futures contract expires.

Costaguanan pulgas (currency)

9,300 pulgas =$1

6,900 pulgas =$1

Costaguanan interest rate is 95% per year.

Establishment Industries

$95

$97.54

Establishment pays dividends of $2 per quarter.

Next dividend is paid two months from now.

common stock

$12,500 per

$14,200 per

Six months’ convenience yield =$250 per tank.

Cheap white wine

10,000-gal. tank

10,000-gal. tank

Your company has surplus storage and can store

50,000 gallons at no cost.

Answered Same Day Dec 31, 2021

Solution

Robert answered on Dec 31 2021
115 Votes
SOLUTION.PDF

Answer To This Question Is Available To Download

Related Questions & Answers

More Questions »

Submit New Assignment

Copy and Paste Your Assignment Here