A company will buy 1,000 units of a certain commodity in one year. The spot price and the futures price are currently $1

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A company will buy 1,000 units of a certain commodity in one year. The spot price and the futures price are currently $1

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A Company Will Buy 1 000 Units Of A Certain Commodity In One Year The Spot Price And The Futures Price Are Currently 1 1
A Company Will Buy 1 000 Units Of A Certain Commodity In One Year The Spot Price And The Futures Price Are Currently 1 1 (57.15 KiB) Viewed 39 times
A company will buy 1,000 units of a certain commodity in one year. The spot price and the futures price are currently $100 and $90, respectively. At the end of one year, the spot price and the futures price turn out to be $112 and $110, respectively. Which of the following is correct? O a. the company were to completely hedge its exposure, it would in effect pay $90,000 to purchase the commodity in one year. b. If the company were to leave its exposure unhedged, it would in effect pay $110,000 to purchase the commodity at the end of one year. Oc. If the company were to hedge 75% of its exposure with the futures contract, it would in effect pay $97,000 to purchase the commodity in one year.
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