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show work please 1. Today is 04/30/20xx. You have a unit of commodity to sell in a month, and you would like to lock the
show work please
1. Today is 04/30/20xx. You have a unit of commodity to sell in a month, and you would like to lock the price at $100 by hedging with futures. Since you are not selling a professionally traded commodity, you take a modified version of futures contract which is marked to the market every week as opposed to every day. The margin account yields 5.2% per annum compounded weekly, with a margin requirement (opening balance) of $40 and maintenance margin (minimum balance) of $20. The futures price of the commodity you are selling is $110 on 05/01, S104 on 05/08, $98 on 05/15, S94 on 05/22, $102 on 05/29. Assume you enter the contract today and will make the delivery on 05/30, using the 05/29 price. Assume one year consists of 52 weeks. (a) (30 pt) Fill out the cash flow table below, showing all the calculation details for (1) (15). Profit is the money you receive, so a cash outflow is negative profit. Date Futures Price Profit Interest Balalce 04/30 100 05/01 05/08 05/15 05/22 05/29 $40 $110 $104 $98 $94 $102 4) 6) (10 (1) (12) (13)(14) (b) (20 pt) If the margin requirement were $20 and maintenance margin $10, what would happen to the futures contract Step by Step Solution
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