Phoenix Motors wants to lock in the cost of $10,000$ ounces of platinum to be used in next quarter's production of catalytic converters. It buys three$-$month futures contracts for $10,000$ ounces at a price of $$1,200$ per ounce.

Suppose the spot price of platinum falls to $$1,150$ in three months' time, answer the following:

a$-1.$ Calculate the profit or loss on the futures contract. $($Enter the amount as a positive value.$)$

a$-2.$ What is the total cost to Phoenix of buying the platinum?

Suppose the spot price of platinum increases to $$1,450$ after three months, answer the following:

b$-1.$ Calculate the profit or loss on the futures contract. $($Enter the amount as a positive value.$)$

b$-2.$ What is the total cost to Phoenix of buying the platinum? a$-1.$

a$-2.$ Total cost

b$-1.$

b$-2.$ Total costProblem $26-27$ Hedging

Phoenix Motors wants to lock in the cost of $10,000$ ounces of platinum to be used in next quarter's production of catalytic converters. It

buys three$-$month futures contracts for $10,000$ ounces at a price of $$1,200$ per ounce.

Suppose the spot price of platinum falls to $$1,150$ in three months' time, answer the following:

a$-1.$ Calculate the profit or loss on the futures contract. $($Enter the amount as a positive value.$)$

a$-2.$ What is the total cost to Phoenix of buying the platinum?

Suppose the spot price of platinum increases to $$1,450$ after three months, answer the following:

b$-1.$ Calculate the profit or loss on the futures contract. $($Enter the amount as a positive value.$)$

b$-2.$ What is the total cost to Phoenix of buying the platinum?