Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A car company needs to buy 8 8 3 metric tons of aluminum in 6 months. It has decided to use futures contracts on aluminum

A car company needs to buy 883 metric tons of aluminum in 6 months. It has decided to use futures contracts on aluminum to hedge its position. Each aluminum futures contract covers 25 metric tons. The spot price of aluminum is $1,592 per ton, while the futures price for delivery in 6 months is $1,758 per ton.
How many futures contracts should the company trade to minimize the risk with tailing the position (rounded to the nearest integer)? Enter a short position as a negative number and a long position as a positive number.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance

Authors: E. Thomas Garman, Raymond E. Forgue

13th edition

1337099759, 978-1337516440, 1337516449, 978-1337099752

More Books

Students also viewed these Finance questions

Question

a. Complete the following Excel table below.

Answered: 1 week ago