Assume that you are the Chief Financial Officer of the mining company XYZ. Today is August...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Assume that you are the Chief Financial Officer of the mining company XYZ. Today is August 2017. By checking the books, you predict a cash shortage in December 2017. You know that you can use 90-day bank bills to solve the cashflow crisis. You have the information on the 90 Day Bank Bills Futures as in below 90 Day Bank Bills (IR) Futures Prices are DELAYED by a minimum of 20 minutes. Expiry Ask Open Sep 17 98.2800 Dec 17 98.2400 98.1700 Mar 18 Bid Jun 18 Sep 18 Dec 18 98.2900 98.2500 98.1800 98.1000 98.0900 98.0200 97.9400 97.9500 98.0300 High 98.2800 98.2800 Low 98.2800 98.2800 98.2400 98.2400 98.1900 98.1900 98.1700 98.1700 98.1000 98.1200 98.1200 98.0900 98.0400 98.0400 98.0200 98.0200 97.9400 97.9500 97.9600 97.9600 98,2500 98.2600 Last Trade Last Trade Time 17/08/17 12:48 17/08/17 12:45 17/08/17 13:00 17/08/17 13:06 17/08/17 13:02 17/08/17 12:55 Change -0.01 -0.01 -0.02 -0.01 -0.01 1. Would you buy or sell 90-day bank bills to help the situation? (buy or sell) 2. At the same time, you fear that the price of the 90-day bills is going to fluctuate over the next three months. You have decided to use 90-day BAB futures to hedge this risk. In order to hedge, would you long or short 90-day BAB futures? (long or short) 3. Assume you need exactly 4 contracts to hedge your cash shortage. How much is the cash shortage? $ (keep 2 decimal points) 4. Let's assume that in December 2017, the spot price for 90-day BAB is quoted at 97.50. Assume that you close-out your futures position. What is the gain (loss) on this contract? $ (keep 2 decimal points, add negative "sign for loss) 5. How much will you raise in the spot market by selling forty 90-day bank bills? $ (keep 2 decimal points) 6. What is the net position in December 2017? (keep 2 decimal points) Assume that you are the Chief Financial Officer of the mining company XYZ. Today is August 2017. By checking the books, you predict a cash shortage in December 2017. You know that you can use 90-day bank bills to solve the cashflow crisis. You have the information on the 90 Day Bank Bills Futures as in below 90 Day Bank Bills (IR) Futures Prices are DELAYED by a minimum of 20 minutes. Expiry Ask Open Sep 17 98.2800 Dec 17 98.2400 98.1700 Mar 18 Bid Jun 18 Sep 18 Dec 18 98.2900 98.2500 98.1800 98.1000 98.0900 98.0200 97.9400 97.9500 98.0300 High 98.2800 98.2800 Low 98.2800 98.2800 98.2400 98.2400 98.1900 98.1900 98.1700 98.1700 98.1000 98.1200 98.1200 98.0900 98.0400 98.0400 98.0200 98.0200 97.9400 97.9500 97.9600 97.9600 98,2500 98.2600 Last Trade Last Trade Time 17/08/17 12:48 17/08/17 12:45 17/08/17 13:00 17/08/17 13:06 17/08/17 13:02 17/08/17 12:55 Change -0.01 -0.01 -0.02 -0.01 -0.01 1. Would you buy or sell 90-day bank bills to help the situation? (buy or sell) 2. At the same time, you fear that the price of the 90-day bills is going to fluctuate over the next three months. You have decided to use 90-day BAB futures to hedge this risk. In order to hedge, would you long or short 90-day BAB futures? (long or short) 3. Assume you need exactly 4 contracts to hedge your cash shortage. How much is the cash shortage? $ (keep 2 decimal points) 4. Let's assume that in December 2017, the spot price for 90-day BAB is quoted at 97.50. Assume that you close-out your futures position. What is the gain (loss) on this contract? $ (keep 2 decimal points, add negative "sign for loss) 5. How much will you raise in the spot market by selling forty 90-day bank bills? $ (keep 2 decimal points) 6. What is the net position in December 2017? (keep 2 decimal points)
Expert Answer:
Answer rating: 100% (QA)
ANSWERS 1 To help the situation I would buy 90day bank bill... View the full answer
Related Book For
Intermediate Accounting Reporting and Analysis
ISBN: 978-1285453828
2nd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Posted Date:
Students also viewed these finance questions
-
1. Determine the amounts of revenue, cost of sales, and gross profit that Amsterdam LLC recognizes in each year. Assume the firm uses the percentage-of-completion method and measures progress based...
-
The franchise arrangement between McDonalds and its franchisees is summarized in the following note from McDonalds 2007 annual report. Individual franchise arrangements generally include a lease and...
-
Perform a common size analysis and percentage change analysis. What do these analyses tell you about Computron? The first part of the case, presented in Chapter 7, discussed the situation that...
-
Using the sinking fund Table 13.3, complete the following: Note: Do not round intermediate calculations. Required amount $ Frequency of Length of payment time 8 years 15,000 Annually Interest rate 8...
-
J.D. Power and Associates Initial Quality Study reports that the industry-average problem rate for vehicles is 108 problems per 100 vehicles. The highest rated brand was Lexus, with a rate of just 84...
-
Explain the following statement: "Whereas the balance sheet can be thought of as asnapshot of the firm's financial position at a point in time, the income statement reports on operations over a...
-
Use the exponent distributive rule to expand \((2 \times 19)^{14}\).
-
In an annual audit at December 31, 2013, you find the following transactions near the closing date: 1. Merchandise costing $625 was received on December 28, 2013, and the invoice was not recorded....
-
Forecasted Statements and Ratios Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a staff to...
-
Using the percentage method for manual payroll with W-4s from 2020 or later in Appendix C calculate the federal withholding amounts for the following employees. No information was included in Step 4...
-
(62.5, 65.1) inches is a 96% confidence interval for the average height of some FSU students' moms. The interval was constructed using data obtained from 52 FSU students. Select the BEST option for...
-
AB The aqueous reaction Product, with known kinetics - 500) (mot min) CACE, is to take place in an experimental tubular reactor (assume plug flow), under the following conditions: Reactor volume...
-
What are closing entries and why are they needed? What are temporary accounts and why do they need to be closed? What are the steps to closing entries?
-
Data related to the inventories of Mountain Ski Equipment and Supplies is presented below: Selling price Cost Skis $ 194,000 135,000 Replacement cost 134,000 Boots $ 164,000 140,000 131,400 Apparel $...
-
Review the week 2 lecture along with the diagram Data can be intimidating and overwhelming in general, especially when dealing with a large or complex dataset. This can be a massive undertaking for...
-
A firm has an EBIT of $780,000 per year that is expected to continue in perpetuity.The unlevered cost of equity of the firm is 12 percent and the corporate tax rate is 21 percent.The company also has...
-
The annual budgeted conversion costs for a lean cell are$288,000 for 1,600 production hours. Each unit produced by the cellrequires 6 minutes of cell process time. During the month, 2,740units are 2...
-
Write a function that reads a Float24_t value: Float24_t float24_read(void) A legitimate float24 value string is of the form: "mantissabexponent" where the mantissa (m) and the exponent (e) may have...
-
During 2016, Boge Corporation signed a noncancelable contract to purchase 10,000 bushels of soybeans at $5 per bushel with delivery to be made in 2017. On December 31, 2016, the price of soybeans had...
-
What steps are necessary to apply the retrospective adjustment method?
-
Use the information in RE3-6, (a) Assuming Ringo Company makes reversing entries, prepare the reversing entry on January 1, 2017, and the journal entry to record the payment of the note on April 1,...
-
A clerk works in a wholesale business that also operates several retail outlets. Thus, cash sales are common. This clerk is responsible for tallying the day's cash receipts and preparing the daily...
-
What is meant by "more than remote?"
-
Forensic accounting is governed by the materiality concept. Analyze this statement.
Study smarter with the SolutionInn App