Calculate the basis per contract on may 1

Assignment Help Finance Basics
Reference no: EM132460043

It is now Feb 1. NoRisk Inc. expects to buy 100 million ounces of silver at the beginning of May. Assume that Silver futures contracts have delivery months in April, June, and August (Assume delivery on the first day of the delivery month). Each contract is for the delivery of 25 million ounces. Assume that the futures price on CME for silver equals its theoretical price. Storage costs will be continuously incurred at a rate of 2% per annum. The continuously compounded risk-free rate is 10% per annum. Spot price of silver on Feb 1 is $10/oz. Spot prices at the future dates will be as follows (we do not obviously know these prices today):

April 1: $10.30/oz

May 1: $10.50/oz

June 1: $10.40/oz

July 1: $10.20/oz

Aug 1: $10.10/oz

(a) Should NoRisk Inc. go short or long on silver futures? How many contracts? Which delivery month?

(b) Calculate the basis per contract (in $/oz.) on May 1.

(c) Calculate the gain or loss on the futures position per contract (in $/oz.).

(d) Calculate the effective price received by the company per contract (in $/oz.) at the beginning of May.

Reference no: EM132460043

Questions Cloud

Percentage of total return on investment : Shelby purchased 100 shares of ABCD Growth fund for $10.00 per share. She had income dividends of $15,
Theory of plasticity Assignment : Theory of plasticity Assignment - Perform the optimization task by a non-linear least square method to obtain C1, C2 of Chaboche plasticity model
What was his total return on investment : During the time he held the stock, he earned dividends of $2.50 per share. What was his total return on his investment?
What is the amount of interest payment : Assume that you purchase a $1,000 bond issued by Kohls that pays 8% interest each year, paid every 6 months. What is the amount of each interest payment?
Calculate the basis per contract on may 1 : (a) Should NoRisk Inc. go short or long on silver futures? How many contracts? Which delivery month? (b) Calculate the basis per contract (in $/oz.) on May 1.
Prepare production reports under the weighted average : Prepare production reports under the weighted average as well as the FIFO method. What is the cost per bottler under each method?
How big will the annual payments? be : December? 31, Beth Klemkosky bought a yacht for ?$120,000. She paid ?$14,000 down and agreed to pay the balance in 9 equal annual installments
How much money did your grandfather originally : How much money would be in the account if you left the money there until your 25th? birthday?
Prevent the use of mtm accounting before enron finance : What are some tactics Goldman used to prevent the use of MtM accounting before Enron Finance had accustomed to it?

Reviews

Write a Review

Finance Basics Questions & Answers

  What will be most important to investigate

In evaluating the department in terms of its increases in sales and expenses, what will be most important to investigate?

  Find the amount of the excess burden

In 2004, Congress voted to subsidize the purchase of capital goods in the manufacturing sector. Nonmanufacturing industries are not eligible for the subsidy.

  Recent income statement and balance sheet

The most recent income statement and balance sheet for the T. McGraw Corporation are as follows:

  Resources to support personal growth and development

Describe why does personal growth and development seem more urgent today than they were in the past and where should I look for the resources to support personal growth and development?

  Social Responsibility of Business Assignment

Social Responsibility of Business Assignment help and solutions:-How does the company demonstrate its duty?

  Select one of the laws listed below and explain how it has

legal aspects of staffing- dq 1select one of the laws listed below and explain how it has changed the staffing

  Compounded lump-sum investment with an interest rate

Investment B is a 10 year, annually compounded lump-sum investment with an interest rate of 7%.

  Assuming annual dividend payments what is the current

assume rhm is expected to pay a dividendnbsp of 5.60 next yearand its dividends are expected to grow at a rate of 6

  Advantages of market order, limit order, and stop order.

Discuss and explain the advantages and disadvantages of market order, limit order, and stop order.

  What is the return on equity roe

A company has taxable income of $1,760 with a tax rate of 38 percent. Owners equity is: $400 in stock, $200 in capital surplus, and $200 in retained earnings. What is the return on equity (ROE)?

  Which would lower the calculated value of the investment

Time lines cannot be constructed where some of the payments constitute an annuity but others are unequal and thus are not part of the annuity.

  Month forward exchange rates

Determine the spot and 12-month forward exchange rates, and determine any change in the ROS repatriated in 12 months based on exchange rates versus the current forecast.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd