discuss how the exchange requirements that mandate traders put up collateral in a form of margin requirement and use this account to mark their profits or losses for the day to serve to eliminate credit or default rise
because ———————— to post margin when they enter into futures contract and because they mark market ————— we are ——————————- the party and the counter party to the contract have already posted the gain or loss to the other risk of default blank———————————-
all lines fill in the blank
construct a delivery date price forward a contract with a delivery price of $70 . Analyze profit for loss values of underlying asset ranging from 50-90$ graph if possible
do the same imputing delivery price $60 and underlying asset ranging 30-85 graph if possible.
Firm A hs10,000 in assets entirely financed with equity Firm B hs 10,000 in assets , but Financed by 5,000 in debt
( with a 10% rate of interest ) costs in production are $1 and are fixed in production costs are 12,000 ( to ease calculation assume no income tax)
a) operating income EBIT both firms
B)what are earnings after interest ?
C) if the sales increase by 10% to 11,000 units by what percentage will each of the firms earnings after interest increase ?
( determine earnings after taxes and compute percentage increase earnings from answers derived part A and B)
D )Why are the percentages different?
the chemical company opertes a crude oil company in la the company refines its crude oil and sells the by products to companies that can make plastic jugs. The firm is currently planning for the year hence .Specifically the firms analyize and estimate that they will need to purchse 1 million barrells of crude oil at the end of the current year to provide the feed stock for its refining needs for the current coming year. Spot price of oil i s $115 per barel . The company has been offered a forward contract by the investor to purchase oil needed for delivery price in one year of $ 120 a year.
a- ingoring taxes, what will the firms profits be if oil prices in one year are as low as or 100 or as high as 140 assuming that the firm doesnt enter into a forward contract
if the firm taxes were to enter into forward contract demonstrate how this would effectively lock the firms cost of fuel today, thus hedging the risk of fluctuating crude oil prices on firms oil prices ( rounding to the nearest dollar)
oil bbl price unhedge annual profits