Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

You have a commitment to supply 10,000 oz of gold to customer in three months' time at some specified price and are considering hedging the price risk that you face.

In each of the following scenarios describe the kind of order (market, limit, etc) that you would use and why you would use that.

a. You are certain you wish to hedge and want to take up a futures position regardless of the price.

b. Gold futures prices have been on an upward trend in recent days and you are not sure you want to enter the market right now. However, if the trend continues, you are afraid you will be locked into too high a price. Weighing the pros and cons, you decide you want to take a futures position if the price continues to trend up and crosses $370 per oz.

c. Consider the same scenario as in b, but now suppose also that you expect a news announcement that you think will drive gold prices sharply lower. If matters turn out as you anticipate, you want to enter into a futures position at a futures price of $350 oz or lower. However you recognize there is a probability the news announcement may be adverse and gold prices may continue to trend up. In this case you want to buy futures and exit if the prices touch $370 oz.

d. You want to institute a hedge only if you can obtain a gold futures price of $365 oz or less.

e. gold futures prices have been on a downward trend in the last few days. You are hoping this continues but dont anticipate prices will fall too much below $362/oz so you are willing to take the best price you can get once prices are at $364/oz.

 

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M928496

Have any Question? 


Related Questions in Basic Finance

Convert generic headings to talking headingsfrom a

Convert generic headings to talking headings. From a preliminary outline for a report, you have the following major and minor generic headings. Convert these to talking headings that you'll include in your final report. ...

1 you are promoting a rock concert in your area your

1. You are promoting a rock concert in your area. Your purpose is to earn a profit, so you need to establish the formal structure of a business entity. Assume you organize as a corporation. 2. Contact a local business an ...

Should a slip-critical joint be analyzed as a friction-type

Should a slip-critical joint be analyzed as a friction-type or bearing-type joint? Describe some of the applications in which slip-critical joints are mandated? What is the difference between a pretension and a slip-crit ...

You have just performed a scenario analysis on a project

You have just performed a scenario analysis on a project, with the following results: Best Case: with a 35% probability, you get an NPV of $77 Base Case: with a 55% probability, you get an NPV of $24 Worst Case: with a 1 ...

King manufacturing turns its inventory 91 times each year

King Manufacturing turns its inventory 9.1 times each year, has an average payment period of 35 days, and has an average collection period of 60 days. The firm's annual sales are $72 million, its cost of goods sold repre ...

1 the vinyl cd co is going to take on a project that is

1. The Vinyl CD Co. is going to take on a project that is expected to increase its EBIT by $80,000, its fixed cost cash expenditures by $125,000, and its depreciation and amortization by $75,000 next year. If the project ...

1 give five examples of physiological measures2 what

1. Give five examples of physiological measures. 2. What considerations must a researcher keep in mind when writing the questions to be used on a questionnaire or in an interview? 3. What is a double-barreled question? 4 ...

1 distinguish between concurrent and predictive validity do

1. Distinguish between concurrent and predictive validity. Do these terms refer to types of construct validity or criterion-related validity? 2. How can we tell whether a particular measure is biased against a particular ...

1 explain why the priorities for liquidation are determined

1. Explain why the priorities for liquidation are determined as they are. Do you agree with the order? 2. What is the difference between economic failure and financial distress? Which situation is likely to lead to liqui ...

1 explain the difference between rejecting and failing to

1. Explain the difference between rejecting and failing to reject the null hypothesis. In which case does a researcher conclude that the independent variable has an effect on the dependent variable? 2. Distinguish betwee ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro