Differences between futures contracts and forward contracts

Assignment Help Financial Management

Reference no: EM131924395

1. What are similarities and differences between futures contracts and forward contracts?

2. When the use of options can be detrimental to the profitability of the company?

3. Harry a rice producer is concerned about short term volatility in its revenues. Rice currently sells for $ 2000 per ton. Since market is volatile so he foresee that selling price could fall as low as $ 1800 per ton or as high as $ 2200 per ton in near future. Harry is planning to supply 5000 tons to market in next month.

(A) What is the consequence if Harry does not hedge against price risk?

(B) What is the cost/benefit to Harry if he enters into a future contract to deliver 5000 tons of rice at an agreed price of $ 2100 per ton next month?

Reference no: EM131924395

Questions Cloud

Describe bankruptcy and the pros and cons : In a 1-2 page paper, describe bankruptcy and the pros and cons.

Discuss theen trepreneurial opportunities in new industry : Discuss theen trepreneurial opportunities in the new industry. Based on movie, how do you understand the role of entrepreneurs in the digital currency industry?

What is opinion regarding valuation for assets : What is your opinion regarding a valuation for the assets of Mr. Lube, and, therefore, was this a fair price for the transaction?

Discuss the five building blocks of progress : In the reading, the book discuses five building blocks of progress( See Attachment). One of the building blocks many leaders have a hard time doing.

Differences between futures contracts and forward contracts : What are similarities and differences between futures contracts and forward contracts? What is the consequence if Harry does not hedge against price risk?

Discuss aspect of bereavement for a group therapy session : Why do you think that some adults become bitter as they face death while others remain positive and active? Propose a plan for addressing some aspect.

Difference between performing capital budgeting analysis : Explain the difference between performing the capital budgeting analysis from the parent firm’s perspective as opposed to the subsidiary project's perspective.

Types of assessment instrument for criminal responsibility : Describe at least one type of assessment instrument for criminal responsibility. What is the research support for utilization of these instruments?

Which method would result in the highest financial reward : Of the three methods, current and two proposed, which method would result in the highest financial reward for the family physician?

User Account

All Pages