Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Posted previously but it was never answered On Jan 1 2016, I bought two Dec 2017 orange juice forward contracts at $5 per contract. The
Posted previously but it was never answered
On Jan 1 2016, I bought two Dec 2017 orange juice forward contracts at $5 per contract. The size of each contract is 1 gallon of orange juice. There is no margin requirement for these forward contracts and they are only settled at maturity. When I purchased the forward contracts, the spot market price of orange juice is $4.5 per gallon. On Jan 1 2016, I paid dollars for the contract. On Jan 1 2016, I received gallons of orange juice. In Nov 2017, the price of orange juice in the spot market jumped from $4.5 to $6 per gallon In Nov 2017, I received a cash flow of dollars. On the delivery day in Dec 2017, I paid dollars. On the delivery day in Dec 2017, I gallons of orange juice received On Jan 1 2016, I bought two Dec 2017 orange juice forward contracts at $5 per contract. The size of each contract is 1 gallon of orange juice. There is no margin requirement for these forward contracts and they are only settled at maturity. When I purchased the forward contracts, the spot market price of orange juice is $4.5 per gallon. On Jan 1 2016, I paid dollars for the contract. On Jan 1 2016, I received gallons of orange juice. In Nov 2017, the price of orange juice in the spot market jumped from $4.5 to $6 per gallon In Nov 2017, I received a cash flow of dollars. On the delivery day in Dec 2017, I paid dollars. On the delivery day in Dec 2017, I gallons of orange juice receivedStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started