You are a jewelry maker. In May of each year, you purchase 10,000 troy ounces of silver to restock your production inventory

You are a jewelry maker. In May of each year, you purchase 10,000 troy ounces of silver to restock your production inventory. Today, you hedged your position at what turned out to be the lowest price of the day. Assume the actual price per troy ounce of silver is 9.215 in May. How much did you gain or lose by hedging your position? Silver - 5,000 troy oz.: U.S. dollars and cents per troy oz.        A.  loss $3,350 B.  loss $2,200 C.  no gain or loss D.  gain $2,200 E.  gain $3,350 Savings = 2 × 5,000 × ($9.215 - $9.550) = -$3,350. You lost $3,350 by hedging.

57.

You are the purchasing agent for a major cookie company. You anticipate that your firm will need 20,000 bushels of oats in December. You decide to hedge your position today and did so at the closing price of the day. Assume that the actual market price turns out to be 228.0 on the day you actually buy the oats. How much did you gain or lose by hedging your position? Oats - 5,000 bu.: cents per bu.        A.  lost $4,000 B.  lost $400 C.  saved $40 D.  saved $400 E.  saved $4,000 Savings = 4 × 5,000 × [(228′ - 230′)/100] = -$400 You lost $400 by hedging.

58.	How much will you pay per pound for a September 130 orange juice futures call option? Orange juice - 15,000 lbs: U.S. cents per lb.        A.  $0.0055 B.  $0.0065 C.  $0.0550 D.  $0.0650 E.  $0.1135 Cost per pound = $0.055

59.	How much will you pay to purchase five August 125 orange juice futures put option contracts? Orange juice - 15,000 lbs: U.S. cents per lb.        A.  $1,200.00 B.  $2,362.50 C.  $4,162.50 D.  $6,637.50 E.  $6,750.00 Total cost = 5 × 15,000 × (5.55′/100) = $4,162.50