Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Eastmark Electrical Equipment Manufacturers needs to secure its supply of copper for the next year. The price copper is extremely volatile because of huge month-to-month

image text in transcribed

Eastmark Electrical Equipment Manufacturers needs to secure its supply of copper for the next year. The price copper is extremely volatile because of huge month-to-month variation in demand. Eastmark wants to break even with a hedge against future copper prices. Currently, the market price for copper is reasonably low at $3.00 per pound or $300 (CWT). Eastmark has entered into a contract with the supplier for 525,000 pounds of copper per month starting in January at market prices. Eastmark has also entered into a futures contract with a financial institution for 525,000 pounds per month at $3.00 per pound. CWT (hundredweight) is equal to 100 pounds in the United States. Suppose the futures contact is still in force in February a. However, assume the firm has just lost a key client's business and only purchases 450,000 pounds of copper. i. Calculate the one month financial and the physical results if the market price of copper has risen to $4.00 per pound. Calculate only the financial impact copper transactions and disregard the loss of revenue due to business loss. The financial result is $525000. (Enter your response as a whole number and include a minus sign il necessary) The physical result is S. (Enter your response as a whole number and include a minus sign if necessary.)

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

Financial Fitness Forever 5 Steps To More Money Less Risk And More Peace Of Mind

Authors: Paul Merriman, Richard Buck

1st Edition

0071786988,0071786996

More Books

Students also viewed these Finance questions

Question

LO28.1 List two ways that economic growth is measured.

Answered: 1 week ago

Question

Explain the strength of acid and alkali solutions with examples

Answered: 1 week ago

Question

Introduce and define metals and nonmetals and explain with examples

Answered: 1 week ago