Phoenix Motors wants to lock in the cost of 10,000 ounces of platinum to be used in next quarter’s production of catalytic converters. It buys three-month futures contracts for 10,000 ounces at a price of $1,240 per ounce.
Suppose the spot price of platinum falls to $1,170 in three months’ time.
a-1. Calculate the profit or loss on the futures contract. (Enter the amount as a positive value.)
a-2. What is the total cost to Phoenix of buying the platinum? (Enter the amount as a positive value.)
Suppose the spot price of platinum increases to $1,430 after three months.
b-1. Calculate the profit or loss on the futures contract. (Enter the amount as a positive value.)
b-2. What is the total cost to Phoenix of buying the platinum?