This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: To hedge the price risk associated with one of its major inputs, Binford Homes uses lumber futures ... (Read 75 times)

tfester

  • Hero Member
  • *****
  • Posts: 534
on: Apr 25, 2021
To hedge the price risk associated with one of its major inputs, Binford Homes uses lumber futures contracts which trade on the Chicago Mercantile Exchange (CME). The CME Random Length Lumber futures contract calls for delivery of 110,000 board feet (110 MBF, 1 MBF is 1,000 board feet of lumber) of random length 8-foot to 20-foot pieces. Primarily, the deliverable species is Western Spruce-Pine-Fir.

In October of last year, Binford Homes bought 100 CME lumber contracts for March delivery at a price of $300 per MBF. It is now March 16th and Binford buys lumber in the spot market, where it trades for $263 per MBF, and executes an offset trade in the futures market. Today's futures prices are quoted in the table below.

Expiry MonthSettlement PriceVOLOpen Interest
March262.509004000
May278.70146416
July283.00226
What is your total purchase cost for the 110 MBF of lumber? The total purchase cost includes profits from the futures transactions.
◦ $300.50 per MBF
◦ $300.00 per MBF
◦ $262.50 per MBF
◦ $263.00 per MBF
Corporate Finance Online ¦ Eakins, McNally ¦ 2nd Edition
Buy Test-Bank


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by tfester on Apr 25, 2021

Shshxj

  • Sr. Member
  • ****
  • Posts: 335
Reply #1 on: Apr 25, 2021
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
Answer Preview
Only 29% of students answer this correctly


tfester

  • Member
  • Posts: 534
Reply 2 on: Apr 25, 2021
Wow, this really help

patma1981

  • Member
  • Posts: 292
Reply 3 on: Yesterday
Great answer, keep it coming :)

« previous next »
 

Did you know?

Adolescents often feel clumsy during puberty because during this time of development, their hands and feet grow faster than their arms and legs do. The body is therefore out of proportion. One out of five adolescents actually experiences growing pains during this period.

Did you know?

When taking monoamine oxidase inhibitors, people should avoid a variety of foods, which include alcoholic beverages, bean curd, broad (fava) bean pods, cheese, fish, ginseng, protein extracts, meat, sauerkraut, shrimp paste, soups, and yeast.

Did you know?

If all the neurons in the human body were lined up, they would stretch more than 600 miles.

Did you know?

There are actually 60 minerals, 16 vitamins, 12 essential amino acids, and three essential fatty acids that your body needs every day.

Did you know?

Warfarin was developed as a consequence of the study of a strange bleeding disorder that suddenly occurred in cattle on the northern prairies of the United States in the early 1900s.

Organ systems of the body with major functions. Organ systems of the body with major functions.
Inputs and Outputs of the Cerebellum Inputs and Outputs of the Cerebellum
Alzheimer's Disease Risk Alzheimer's Disease Risk
George Herbert Mead (1863– 1931) is one of the founders of symbolic interactionism, a major ... George Herbert Mead (1863– 1931) is one of the founders of symbolic interactionism, a major ...
The major events associated with the three phases of energy metabolism: the cephalic, absorptive, ... The major events associated with the three phases of energy metabolism: the cephalic, absorptive, ...
The relationship between maternal age and the frequency of trisomy 21 (Down syndrome). The risk incr The relationship between maternal age and the frequency of trisomy 21 (Down syndrome). The risk incr
Video: Acids and bases - definition

For a complete list of videos, visit our video library