What is the initial margin requirement in october 2004

Assignment Help Financial Management
Reference no: EM13201034

It is now October 2004. A company anticipates that it will purchase 1 million pounds ofcopper in each of February 2005, August 2005, February 2006, and August 2006. Thecompany has decided to use the futures contracts traded in the COMEX division of theNew York Mercantile Exchange to hedge its risk. One contract is for the delivery of25,000 pounds of copper. The initial margin is $2,000 per contract and the maintenancemargin is $1,500 per contract. The company's policy is to hedge 80% of its exposure.Contracts with maturities up to 13 months into the future are considered to have sufficientliquidity to meet the company's needs. Devise a hedging strategy for the company.Assume the market prices (in cents per pound) today and at future dates are as follows:Date Oct. 2004 Feb. 2005 Arrg. 2005 Feb. 2006 Arrg. 2006-Spot price 72.00 69.00 65.00 77.00 88.00Mar. 2005 futures price 72.30 69.10Sept. 2005 futures price 72.80 70.20 64.80Mar. 2006 futures price 70.70 64.30 76.70Sept. 2006 futures price 64.20 76.50 88.20 What is the impact of the strategy you propose on the price the company pays for copper? What is the initial margin requirement in October 2004? Is the company subject to anymargin calls?

Reference no: EM13201034

Questions Cloud

Define how many adult tickets were sold : There were 67 fewer student tickets sold than adult tickets. How many adult tickets were sold?
At what rate is his distance from second base changing : A baseball diamond is a square 90 ft on each side. A player is running from home to first base at the rate of 25 ft/sec. At what rate is his distance from second base changing when he has run halfway to first base?
State rotating at a rate of one revolution : rotating at a rate of one revolution every 2 minutes. How fast is a rider rising when the rider is 25 m above ground level?
Are the cross elasticity substitutes or complements : The cross elasticity of demand for Ziggles and Wonkers equals 3.6. Are they substitutes or complements The cross elasticity of demand for Frizzles and Fuzztops equals -5.1. Are they substitutes or complements
What is the initial margin requirement in october 2004 : What is the initial margin requirement in October 2004 and is the company subject to anymargin calls and what is the impact of the strategy you propose on the price the company pays for copper?
What was the speed on each part of the trip : During the first part of a trip a canoeist travels 62 miles at a certain speed. The canoeist travels 17 miles on the second part of the trip at a speed 5 mph slower. The total time for the trip is 4 hrs. What was the speed on each part of the trip..
State snookers lumber can convert logs into either lumber : Snookers lumber can convert logs into either lumber or plywood. In a given day, the mill turns out three times as many units of plywood as lumber
What is the probability that the student is both a sophomore : Suppose that a certain college class contains 38 students. Of these, are 26 sophomores, 15 are science majors, and 6 are neither. A student is selected at random from the class.
Is the effect stronger or weaker than movie industry results : The income elasticity of demand for clothing is estimated at +0.5. What would you expect to happen to clothing revenues when incomes are rising When incomes are falling Is the effect stronger or weaker than the movie industry results

Reviews

Write a Review

 

Financial Management Questions & Answers

  Efficient market hypothesis

Provide a description of the three forms of the Efficient Market Hypothesis using the picture below.  Do you think the markets are efficient?

  Determine the feasibility of the capital project

Determine the WACC given the above assumptions and indicate how these might be useful to determine the feasibility of the capital project.

  Does this change have an impact on their decision

Recalculate the NPV assuming the machine press can only be sold for $45,000 at the end of year four.  Does this change have an impact on their decision?

  What is a business plan

Explain how the idea of a brewing device for a small apartment became a startup enterprise. What did you learn from that bit of entrepreneurial history

  Wal-mart company financial analysis

Wal-Mart company Financial analysis

  Complete the financial reporting for each period

Complete the financial reporting for each period

  What is the initial investment outlay

What are the two projects net present values assuming the cost of capital is 5%?  What is the initial investment outlay?

  Overview of financial management

Overview of Financial Management

  What are factors affecting the capital structure of company

Calculate the NPV and IRR for the project from the standpoint of the parent company. What are your recommendations for the proposal?

  Prepare a report for the managing director

Prepare a report for the managing director both outlining the theoretical arguments and explaining the real-world influences on the gearing levels of firms.

  Calculate the annualized forward premium

Calculate the annualized forward premium or discount on six-month forward yen and calculate the profitability of each of BLP's five subsidiaries.

  Negative growth stock

Questions related to Negative growth stock

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