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It is now October 2004. A company anticipates that it will purchase 1 million pounds ofcopper in each of February 2005, August 2005, February 2006, and August 2006. Thecompany has decided to use the futures contracts traded in the COMEX division of theNew York Mercantile Exchange to hedge its risk. One contract is for the delivery of25,000 pounds of copper. The initial margin is $2,000 per contract and the maintenancemargin is $1,500 per contract. The company's policy is to hedge 80% of its exposure.Contracts with maturities up to 13 months into the future are considered to have sufficientliquidity to meet the company's needs. Devise a hedging strategy for the company.Assume the market prices (in cents per pound) today and at future dates are as follows:Date Oct. 2004 Feb. 2005 Arrg. 2005 Feb. 2006 Arrg. 2006-Spot price 72.00 69.00 65.00 77.00 88.00Mar. 2005 futures price 72.30 69.10Sept. 2005 futures price 72.80 70.20 64.80Mar. 2006 futures price 70.70 64.30 76.70Sept. 2006 futures price 64.20 76.50 88.20 What is the impact of the strategy you propose on the price the company pays for copper? What is the initial margin requirement in October 2004? Is the company subject to anymargin calls?
complete the financial reporting for each period and develop recommendations using the templates provided. procedure1.
Explain what the information needs of various stakeholders are for their respective decision making needs.
ou will also be expected to carry out horizontal analysis on the Income Statement using (2010 as base) and vertical common size analysis on the Statement of Financial Position (Balance Sheet) for 2 year.
International trade agreements eliminate trade barriers between countries, promote investments, infuse competitiveness, enhance productivity, create jobs, and provide consumers with a greater range of options at cheaper prices.
In the hope of high returns, venture capitalists provide funds to finance new companies. However, potential competitors and structures of the market into which the new firm enters are extremely important in realization of profits.
Can you help Mr. Jackson develop a financial plan? Do you think his growth plan is feasible? Specific calculations are not necessary, but you should describe any specific calculations one may use to assist Mr. Jackson.
this case is intended to be an introduction to the various methods used in capital budgeting and looks at some of the
The following data are displayed in the financial market: Spot price on Walmart stock = $59; Expiration of the futures contract = one year; Interest rate = 6 percent per year;
State the intrinsic value and the speculative premium for the call and put options. Why is the speculative premium so small for each option - Use the Black-Scholes OPM to find C.
Compare the hedging alternatives for the MYR with a scenario under which Yankee remains unhedged. Do you think Yankee should hedge or remain unhedged? If Yankee should hedge, which hedge is most appropriate?
A synthesis of contemporary market orientation perspectives
This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.
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