Established by how many copper futures contracts

Assignment Help Financial Management

Reference no: EM13890200

Sparks Electrical has just won the contract to wire a new high rise office building to be built in Phoenix. The contract requires the purchase and installation of 1,125 thousand feet of copper wire. Fearing an impending increase in the price of copper wire, Sparks wants to hedge its contract by using the copper futures contract (25,000 pounds per copper futures contract). The estimated relationship between the stock price and the copper futures price is S ($ value of the fund in thous) = a + b F($/pound) where b is 250. It is estimated that the price of copper wire increases by 400 cents per thousand feet for each one cent increase in the copper futures price. A properly constructed cross hedge is established by how many copper futures contracts? Please provide a step by step solution if you are able to.

Reference no: EM13890200

Questions Cloud

Firm is considering leasing new radio-graphic device : Your firm is considering leasing a new radio graphic device. The lease lasts for three years. The lease calls for four payments of $25,000 per year with the first payment occurring immediately. The computer would cost $140,000 to buy and would be str..

Discuss the economic consequences : Discuss the multiple ways in which increased consumption of sugar in the seventeenth and eighteenth centuries was the cause and consequence of stronger economic connections between Asia, Africa, Europe, and America.

Rhetorical analysis-discourse community document analysis : Rhetorical Analysis-Discourse Community Document Analysis

Offered to buy a financial security that guarantees to pay : Elizabeth is offered to buy a financial security that guarantees to pay her $10 every 2 years forever. The annual interest rate is 8%. How much would she pay for it today if the first payment will be received today? How much would she pay for it toda..

Established by how many copper futures contracts : Sparks Electrical has just won the contract to wire a new high rise office building to be built in Phoenix. The contract requires the purchase and installation of 1,125 thousand feet of copper wire. A properly constructed cross hedge is established b..

Briefly summarize the proposal and its impact : Start with the DOL's own web site or one of many out there maintained by interested players such as ogletreedeakins.com or allbusiness.com. Briefly summarize the proposal and its impact, and discuss why you think it is potentially a positive or ne..

Receivables are usually a significant portion of : Receivables are usually a significant portion of

Explain the duty of good faith bargaining : Explain the duty of good faith bargaining. What should a party to do if the other side is unreasonable in its demands? Identify and discuss the mandatory versus permissive subjects of a collective bargaining agreement

Calculate the price of a zero coupon bond : Calculate the price of a zero coupon bond that matures in 15 years if the market interest rate is 5.5 percent. Par Value $1000. Zero coupon bond price .

User Account

All Pages