A company will buy 1000 units of a certain commodity in one, Ask an Expert

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A company will buy 1000 units of a certain commodity in one year. It decides to hedge its exposure using futures contracts. The spot price and the futures price are currently $100 and $90, respectively. Suppose that the spot price and the futures price in one year turn out to be $112 and $110, respectively.

A. What futures position should the company take?

B. What is the payoff per unit of the hedge?

C. What is the effective unit price paid for the commodity?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92064601

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