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KiRa [710]
3 years ago
9

A company will buy 1000 units of a certain commodity in one year. It decides to hedge 80% of its exposure using futures contract

s. The spot price and the futures price are currently $100 and $90, respectively. The spot price and the futures price in one year turn out to be $112 and $110, respectively. What is the average price paid for the commodity
Business
1 answer:
Nataliya [291]3 years ago
6 0

Answer:

$96 per unit

Explanation:

The computation of the average price paid for the commodity is shown below:

Average price = Total cost ÷ Total number of units

where,

Total cost = Total number of units buyed × spot rate - hedge fund

where,

Hedge fund is

= 1,000 × 80% × ($110 - $90)

= $16,000

So, the total cost is

= 1,000 units × $112 - $16,000

= $96,000

Now the average price is

= $96,000 ÷ 1,000 units

= $96 per unit

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kaheart [24]
Business firms that sell to retailers and other merchants, and/or to industrial, institutional, and commercial users-but which do not sell in large amounts to final consumers-are called wholesalers. These are businesses that  would purchase product in very large amounts and sells them to other businesses or the retailers at a lower price whose target customers are the consumers. 
7 0
3 years ago
To save for retirement, Jamie decides to invest in an annuity that pays 5% annual interest, compounded annually. If Jamie contri
tatyana61 [14]

Answer:

Interest= $26,131.91

Explanation:

Giving the following information:

Annual deposit= $2,000

Number of periods= 20 years

Interest rate= 5%

<u>First, we need to calculate the future value using the following formula:</u>

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

FV= {2,000*[(1.05^20) - 1]} / 0.05

FV= $66,131.91

<u>Now, we can determine the interest earned:</u>

Interest= future value - total investment

Interest= 66,131.91 - 20*2,000

Interest= $26,131.91

6 0
3 years ago
__________________ has always been a feature of the Taiwanese economy, but experts warn that the _______________ _______________
liubo4ka [24]

Statistics

Exports $318 billion (2014 est.)

Export goods Electronics, flat panels, ships, petrochemicals, machinery; metals; textiles, plastics and chemicals (2014)

Main export partners China 27.1% Hong Kong 13.2% United States 10.3% Japan 6.4% Singapore 4.4% (2012 est.)

Imports $277.5 billion (2014 est.)

4 0
3 years ago
What is the motivation for stockpiling? a. to avoid the unintended transformation of inventory before sale or use, rendering it
Tems11 [23]

Answer:

c. to avoid delays in order fulfillment due to inadequate supply

Explanation:

Stockpiling refers to keeping a large amount of inventory to have it avaiable in the future. Usually, companies do this when they think that the products may not be available to purchase it later and they decide to buy a large amount to avoid problems with the supply. According to this, the answer is that the motivation for stockpiling is to avoid delays in order fulfillment due to inadequate supply.

The other options are not right because having a large inventory is not related to be able to produce at a level rate, stockpiling can lead to unintended transformation of inventory and you might save money by ordering a large amount but you will increase your storage costs to maintain the inventory in a warehouse.

3 0
3 years ago
You recently received a letter from Cut-to-the-Chase National Bank that offers you a new credit card that has no annual fee. It
Alex17521 [72]

Answer:

Effect Annual rate of return =17.22%

Explanation:

The Effective annual rate of return is the equivalent rate earned where compounding is done frequently at period or interval  less than a year.

EAR = (1+r/m)^n× m - 1

EAR - Equivalent annual rate of return, r- annul rate of return, n-number of years

r= 16/12 =1.333%, n= 1    m= 12 (note there are 12 months in a year)

EAR = (1+0.16/12)^(1×12) -   1

EAR = 1.0133^12 - 1 = 0.1722

EAR   0.1722  × 100 =  17.22%

Effect Annual rate of return =17.22%

7 0
3 years ago
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