Futures position within its range of expected prices

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Reference no: EM131355230

Shakila Corporation must pay its Japanese supplier ¥125 million in three months. Aziz could buy 10 three-month yen futures contracts (contract size is ¥12.5 million) at a price of $0.007940/¥. The current spot rate is ¥1=$0.007823. Aziz’s treasurer believes that the most likely value for the yen in 90 days is $0.007900, but the yen could go as high as $0.008400 or as low as $0.007500.

1. Diagram Shakila’s gains and losses on the futures position within its range of expected prices.

2. Calculate what Shakila would gain or lose on the futures positions if the yen settled at its most likely value?

Reference no: EM131355230

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