Entered into a futures contract and bought a call option

Assignment Help Financial Management
Reference no: EM13810353

You need a barrel of oil next month. You could either buy the oil today and keep it for a month, wait and buy the oil next month when you need it, you could enter into a futures contract to buy oil at the current futures price $81, or you can pay $2 for a call option that gives you the right to buy oil for $80. The current spot price is $79 and the risk free rate is 2%, and carrying costs are $2. If the price ends up being $84 next month, then you should have ______________.

a) Waited to buy the oil

b) Entered into a futures contract

c) Bought a call option

d) Buy the oil today and store it for a month.

Reference no: EM13810353

Questions Cloud

Perform a swot analysis of the organization : Provide a brief description of the company that you have selected and the product or service that you are analyzing. Discuss what quality means for this product. Perform a SWOT analysis of the organization.
Benefits and limitations to using interview as a methodology : What are some of the benefits and limitations to using interview as a research methodology
Which of these should cause the dollar to appreciate : Which of these should cause the dollar to appreciate?
Database modeling : After reading this week's article, "Modeling for the Future," expand on the subject of Database Modeling. There are several tools listed and reviewed in the article. Research these tools further, or identify other modeling tools
Entered into a futures contract and bought a call option : You need a barrel of oil next month. You could either buy the oil today and keep it for a month, wait and buy the oil next month when you need it, you could enter into a futures contract to buy oil at the current futures price $81, or you can pay $2 ..
Problem regarding the cause-and-effect diagram : The cause-and-effect diagram is important in determining causes and effects of a problem. The cause-and-effect diagram is also known as the Ishikawa diagram, or the fishbone diagram. Creating the diagram requires knowledge of causes for a problem ..
Forward contracts are standardized and trade on an exchange : Forward contracts are standardized and trade on an exchange. Profits and Losses on Futures contracts are marked to market on a daily basis. Delivery of the assets almost never occurs in the forward market.
Savingsaccount objects and two checkingaccount objects : Develop a polymorphic banking application using the Account hierarchy you created. Create the following two SavingsAccount objects and two CheckingAccount objects and store them in an array called "arrays" of Account references to the objects
Sport and society : sport and society

Reviews

Write a Review

Financial Management Questions & Answers

  What would your equal monthly payments be

Your uncle will sell you his bicycle shop for $240,000, with "seller financing," at a 6.0% nominal annual rate. The terms of the loan would require you to make 12 equal end-of-month payments per year for 4 years, and then make an additional final (ba..

  Compute the irr and mirr for project erie

Based on the cash flows shown in the chart below, compute the IRR and MIRR for Project Erie. Suppose that the appropriate cost of capital is 12 percent. Advise the organization about whether it should accept or reject the project.

  Proposed expansion of an existing subsidiary

You are evaluating a proposed expansion of an existing subsidiary located in Switzerland. The cost of the expansion would be SF 21 million. The cash flows from the project would be SF 5.9 million per year for the next five years. The dollar required ..

  Riparian rights in comparison to prior appropriation

In well-organized and thorough responses, summarize the major economic and property rights issues associated with the following topics:  The case of Kelo vs. New London, Connecticut. Riparian Rights in comparison to Prior Appropriation

  Due to the increased globalization of financial markets

Due to the increased globalization of financial markets, we can expect all of the following, except:

  Operating and financial constraints placed on corporation

Operating and financial constraints placed on a corporation by loan provision are

  Explain what is the firm''s weighted average cost of capital

Fancee Restaurant's cost of equity is 15.3 percent and its aftertax cost of debt is 6.1 percent. What is the firm's weighted average cost of capital if its debt-equity ratio is 0.58 and the tax rate is 30 percent?

  Revaluing the chinese yuan

Do you believe that the revaluation of the Chinese yuan's was politically or economically motivated

  What would immanuel kants categorical imperative

You are an expert security software programmer who works in top secret for the national government of the country of Zulu. Late one afternoon, you come across an ominous email in which you learn that a small group of sinister government officials fro..

  Write a check to ]aural

Successive loan deposited in a checking account and no banks keeping any excess reserves -  suppose First Main Street Bank loans out all of its new excess reserves to Kristen, who immediately uses the funds to write a check to ]aural.

  Internal rate of return and net present value

Internal Rate of Return and Net Present Value

  The paradise shoes company has estimated its weekly tvc

the paradise shoes company has estimated its weekly tvc function from data collected over the past several months as

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd