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GREYUIT [131]
3 years ago
14

A company wishes to hedge its exposure to a new fuel whose price changes have a 0.6 correlation with gasoline futures price chan

ges. The company will lose $1 million for each 1 cent increase in the price per gallon of the new fuel over the next three months. The new fuel's price change has a standard deviation that is 50% greater than price changes in gasoline futures prices. If gasoline futures are used to hedge the exposure what should the hedge ratio be? What is the company's exposure measured in gallons of the new fuel? What position measured in gallons should the company take in gasoline futures? How many gasoline futures contracts should be traded? Each contract is on 42,000 gallons.
Business
1 answer:
Anton [14]3 years ago
5 0

Answer:

0.9; 100 million; 90 million; 2,143

Explanation:

The new fuel's price change has a standard deviation that is 50% greater than price changes in gasoline futures prices.

So, if standard deviation of future prices is taken as '1' then for spot price it will be 50% higher, i.e 1.5

The hedge ratio:

= Correlation × (standard deviation of spot price ÷ Standard deviation of future prices)

= 0.6 × (1.5 ÷ 1)

= 0.9

The company has an exposure of 100 million gallons of the new fuel.

Gallons in future gasoline:

= Hedge ratio × 100 million gallons of the new fuel

= 0.9 × 100

= 90 million

Each contract is on 42,000 gallons, then

Number of gasoline futures contracts should be traded:

= 90,000,000 ÷ 42,000

= 2,142.9 or 2,143

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The financial statements of Vaughn Manufacturing Company report net sales of $643100 and accounts receivable of $92000 and $2600
Sloan [31]

Answer:

The correct answer is 10.9 times.

Explanation:

According to the scenario, computation of the given data are as follow:-

Average account receivable = (Opening account receivable + Closing accounts receivable) ÷ 2

= ($92,000 + $26,000) ÷ 2

= $118,000 ÷ 2

= $59,000

We can calculate the account receivable turnover by using following formula :-

Accounts receivable turnover = Net sales ÷ Average Account receivable

= $643,100 ÷ $59,000

= 10.9 times  

3 0
3 years ago
A firm’s _____ is the percent of the total market for a product that is controlled by that company.
andrey2020 [161]
The answer is Market share

For example is the search engine product in US' Market.

In US , 60 % of internet users use google , 30 % of internet users use bing ( after it combined with yahoo), and the other 10 % use other search engine( such as Baidu,Naver, Geocities, etc).

From data above, we could conclude that Google has 60 % of market share in search engine product, Bing has 30 % marketshare, etc

4 0
3 years ago
Suppose that a large lake in the middle of Minnesota evaporates, leaving more fertile farm land for growing corn available. Assu
densk [106]

Wages would fall as the number of workers available grows. Landowners in Louisiana will earn more rent as the demand for land increases.

<h3>What is the law of demand and supply?</h3>

The law of supply and demand is still in effect:

Wages: when the amount supplied increases, but the quantity required does not, the price falls.

When the quantity required increases without the quantity supplied increasing, the price rises.

Thus, Wages would fall as the number of workers available grows.

For more details about law of demand, click here:

brainly.com/question/14273030

#SPJ1

7 0
1 year ago
Probett’s Garage uses 120 boxes of cleaning cloths a year. The boxes cost $6 each. Ordering cost is $3 and holding cost is 10 pe
faust18 [17]

Answer: $730.2

Explanation:

Let the total cost of cleaning clothes = X

Other variables include:

Total cost of boxes = $6×120

=$720

Ordering cost =$3

Holding costs = (10/100 ×6)12

=$7.2

Total costs of cleaning clothes =

The cost of boxes+ordering cost+holding cost

=720+3+7.2 = $730.2

3 0
3 years ago
A company issues a​ ten-year bond at par with a coupon rate of 6.4​% paid​ semi-annually. The YTM at the beginning of the third
sladkih [1.3K]

Answer:

\mathbf{current  \ price \  of \  the \ bond=  \$848.78}

Explanation:

The current price of the bond can be calculated by using the formula:

current  \ price \  of \  the \ bond= ( coupon \times  \dfrac{ (1- \dfrac{1}{(1+YTM)^{no \ of \ period }})}{YTM} + \dfrac{Face \ Value }{(1+YTM ) ^{no \ of \ period}}

current  \ price \  of \  the \ bond= ( \dfrac{0.064 \times \$1000}{2} \times  \dfrac{ (1- \dfrac{1}{(1+ \dfrac{0.091}{2})^{8 \times 2}})}{\dfrac{0.091}{2}} + \dfrac{\$1000 }{(1+\dfrac{0.091}{2} ) ^{8 \times 2}})

current  \ price \  of \  the \ bond=  \$32 \times $11.19 + \$490.70

current  \ price \  of \  the \ bond=  \$358.08+ \$490.70

\mathbf{current  \ price \  of \  the \ bond=  \$848.78}

5 0
3 years ago
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