Calculate his net cost of buying XYZ shares

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Problem - Anthonyr is planning to buy 4 000 shares of XYZ once funds are available to him in five months' time. Futures contracts on XYZ deliver 100 shares each and expire six months from now. He buys 40 of these contracts at a price of $30 [per share} to hedge against upward price movements in the stock. Five months later (t=5) the stock price of XYZ is $33 and the futures price is $34 (to expire in one months' time]. If Anthony closes out his futures position and then proceeds to buy the shares in the market both at t=5), calculate his net cost of buying XYZ shares once the futures gain/loss is considered.

Reference no: EM133035581

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