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Question: 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 $1,240 per ounce.

Suppose the spot price of platinum falls to $1,170 in three months' time.

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? (Enter the amount as a positive value.)

Suppose the spot price of platinum increases to $1,430 after three months.

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?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M92869004

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