Question
Use the following information to answer the next four questions. Your company needs to purchase 100 tons of steel in the next few days. On
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Use the following information to answer the next four questions.
Your company needs to purchase 100 tons of steel in the next few days. On Monday, you opened a position consisting of 5 steel futures contracts to mitigate price risk. Each contract has 20 tons of steel attached. The initial and maintenance margins per contract are $440 and $400, respectively. Steel futures contracts were trading at $650 per ton the day you opened your position. Steel prices on Tuesday and Wednesday were $646/ton and $648/ton, respectively.
Based on the information above, you should take a short position in the five steel futures contracts.
True
False
b/
Find your ending margin balance on Tuesday. Assume any deficits are eliminated to keep the position open.
1800 | ||
2600 | ||
2400 | ||
1600 | ||
None of the above |
c/ Find your ending margin balance on Wednesday. Assume deficits are eliminated to keep the position open. Round intermediate steps to four decimals and your final answer to two decimals. Do not use currency symbols or words when entering your response
d/
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Find your ROIC if you close your position Thursday when the futures price is $649/ton. Round intermediate steps to four decimals.
.0909
.10
-.0455
-.0385
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