2. The futures price of a commodity such as wheat is $12.50 a bushel. Futures contracts are for 10,000 bushels, and the margin requirement is $2,500 a contract. A speculator expects the price of the commodity to rise and enters into one contract to buy wheat. 2 points each a. How much must the speculator initially remit (margin)? 2,500 b. If the futures price rises to $15.90, what is the percent return on the position? % c. If the futures price declines to $9.25, what is the percent loss on the position? 9 3 One of TWA's largest expenses is for jet fuel which is trading today at $200 per barrel. TWA hedges its risk in jet fuel by entering into futures contracts. TWA has purchased 50 futures contracts for 1,000 barrels each with a margin of $3,500 for each contract and a price per barrel of $205 with deliver in 2 months. 2 points each a. If the price of jet fuel moves to $225 per barrel, how much will TWA pay per barrel in 2 months? b. What is the total amount of margin in TWA's opening position? c What is the total value of TWA's opening position? d. If the price of jet fuel moves to $235 per barrel, what is the dollar value of the savings from entering into the 50 futures contracts? e. If the price of jet fuel moves to $215 per barrel, what is the dollar value of the savings from entering into the 50 futures contracts? 4: The company has submitted a bid to build 25 Wind Turbines for the Japanese government for 18,625,000 JPY each. The company wants to hedge the JPY/USD exchange rate to ensure it doesn't have reduced profits due the currency fluctuations. The current rate is 1USD=119JPY and the contract is scheduled to be awarded in 6 months. 2 pts each a. What is the total value in USD for the contract at the current exchange rate? c. What would be the value in USD for the contract if the JPY appreciated to 100 JPY to buy one USD? Each put option contract is for 12,500,000 Japanese yen. Each put option contract costs $1,500 for 6 months with a strike price of 119 USD/JPY (it takes 119 JPY to buy a \$). d. How many put option contracts would need to be purchased to cover the risk? e. What would be the total premium paid for these options to cover the risk? f. What would be the Amount received if the JPY depreciates to 135 JPY including the reduction for buying the options. g. What would be the Amount received if the JPY appreciates to 90JPY including the reduction for buying the options