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VLD [36.1K]
2 years ago
5

You just sold a futures contract on €. Each contract is for €125,000 and the price you sold for the € is $1.20 for each €. What

is your profit/loss if the spot rate when the contract matures is $1.10?
Business
1 answer:
Yuliya22 [10]2 years ago
3 0

Answer:

The profit is $12,500

Explanation:

The profit on the contract can be computed using the formula below:

profit/loss on the contract=(forward price-spot rate)*volume of currency sold

forward price is 1 euro to $1.20

spot price     1 euro to  $1.10

volume of currency sold is Euros 125,000

profit/loss on the contract=($1.20-$1.10)*125,000

                                             =$12,500

Invariably the trader sold each US dollar $0.10 more than the spot rate ($1.20-$1.10),when that is multiplied the volume of Euros sold,it gives $12,500 in profit.

This implies that the buyer could have bought the currency cheaper on contract date

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orrugated Company currently produces cardboard boxes in an automated process. Expected production per month is 40,000 units. The
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Answer:

$36,000 and $30,000

Explanation:

Corrugated company deals in the production of cardboard boxes

The expected production for each month is 40,000 units

The direct material cost is $0.30 per unit

The manufacturing fixed overhead costs are $24,000 for each month

Therefore, the flexible budget for the production of 40,000 units and 20,000 units can be calculated as follows

Flexible budget for 40,000 units

= 0.30×40,000+24,000

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Flexible budget for 20,000 units

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= 6,000+24,000

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Hence the flexible budget for 40,000 units and 20,000 units are $36,000 and $30,000 respectively

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Melbourne Company uses the perpetual inventory method. Melbourne purchased 500 units of inventory that cost $4.00 each. At a lat
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