The wires company manufactures wire

Reference no: EM13714947

The Wires Company manufactures wire, for which it must buy copper. Two pounds of copper will produce one unit of wire, which sells for the price of the two pounds of copper plus $8. The fixed cost of the unit of wire is $4 and the variable cost is $3. The current cost of copper is 1.10 per pound. Which of the following might be advisable for Wires?

a.) hedge by buying a .90 strike call for copper

b.) hedge by designing a pay later option strategy for copper

c.) hedge with a collar for copper

d.) it is not necessary to hedge the cost of copper

e.) none of the above

Reference no: EM13714947

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