Calculate the total cost savings or additional expenses

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Problem

Azus Electronics plans to purchase electronic components in six months. It enters into a forward contract to buy 10,000 units at $50 each. The current spot price is $55. Additionally, Azus hedges using a futures contract, agreeing to buy 10,000 units at $52. The actual spot and futures prices in six months are $58 and $55, respectively.

A. Calculate and interpret the total cost savings or additional expenses from using the forward contract.

B. Calculate and interpret the total cost savings or additional expenses from using the futures contract.

Reference no: EM133724309

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