Business, 02.04.2020 21:02 jorell

Cranked Coffee Company's cost of producing copper is about $3.95 per pound. The current market price for copper is $4.74 per pound. The six-month futures price for copper is $4.94 per pound. At this selling price, the company can maintain its earnings growth. The company expects to produce 1,250,000 pounds of copper in this six months. (Note: Copper futures are traded at a standard size of 250,000 pounds.) Cranked Coffee places a hedge on its copper production in the futures market. When the contract comes due in six months, the spot price of copper is $3.36 per pound in the cash markets. Prices on the new six-month futures contracts in copper are $4.20 per pound. The net gain or loss in the futures market is:a. $0b. $5,250,000c. -$737,500d. $1,975,000e. -$6,175,000

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Cranked Coffee Company's cost of producing copper is about $3.95 per pound. The current market price...

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