Before 1972, futures trading was dominated by agricultural commodities. The spectacular growth of financial futures now accounts for approximately 50% of all futures trading. Why are they so popular? Is there any risk? Which industry dominates the market?
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Before 1972, futures trading was dominated by agricultural commodities. The spectacular growth of financial futures now accounts for approximately 50% of all futures trading. Why are they so popular? Is there any risk? Which industry dominates the market?
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- You are a crude oil dealer. You intend to sell 50,000 barrels of crude oil in December. Each contract calls for delivery of 2,000 barrels of oil. Current futures price of one barrel of crude oil is $70. You believe that there are only four possible oil prices in December which are $50, $60, $70, and $80.i. Explain what action you would take to protect from changes in oil prices in December. Provide reasons for your action.ii. Calculate the total proceeds (sales proceeds plus loss or profit from futures contracts) for each of the possible price in December.A buyer or seller must consider a number of risks when evaluating whether a long-term contract is necessary or even desirable. Three primary questions must be asked when developing a long-term contract and considering the risks: What is the potential for opportunism? In other words, how likely is the supplier to take advantage of the purchaser (or vice versa)? Is this the right supplier to engage in a long-term contract? C.Is there a fair distribution of risk and gains between the parties involved?What is an economic bubble? A product of illegal asset trading. Assets that are worthless. The start of a recession. An asset price that has risen above the level justified by economic fundamentals.
- There were still pirates in the 1980s, although they tended to appear in corporate boardrooms rather than the open seas. These swashbuckling financiers would engage in a “hostile takeover” by acquiring a company through the purchase of shares on the open market and against the will of the target company’s existing management (thus making the takeover “hostile”). Such investors were known as “raiders” and included people such as T. Boone Pickens, Sir James Goldsmith, Henry Kravis, and Victor Posner. All this was fictionalized in the movie Wall Street, with Michael Douglas portraying the raider Gordon Gekko, who famously espoused “Greed is good.” The time was full of jocular jargon, as management could consume a “poison pill” by taking on a costly financial structure that would make it difficult to consummate a hostile takeover. In some cases, a raid could be fought against by buying a raider’s shares back at a premium; this tack became known as “greenmail,” a takeoff on blackmail. To…When frequency, asset specificity and uncertainty rise, what happens to the cost of using the market?A long forward contract means that the contract will become more valuable as the price of the asset declines. true or false
- Futures contract are used as instruments of speculation in which of the following ways: Group of answer choices buy commodity now and resell it right away sell commodity now and wait for price to drop buy the future delivery and hope the commodity will be cheaper than now buy future delivery of a commodity and hop it will be more expensive than it is nowReady Foods contracts to buy two hundred carloads of frozen pizzas from Speedy Distributors. Before Ready or Speedy starts performing, can the parties call off the deal? What if Speedy has already shipped the pizzas? Explain your answers.Name the four methods of payment for international shipments. Which method is riskiest for the buyer? For the seller?
- CITGO, the petroleum company owned by the Venezuelan government, sells its products throughout the world. Do you anticipate that its market positioning and advertising differ in different countries? Why or why not?Distinguish between a tender offer and a compulsory share exchange.You are thinking about purchasing an elegant shirt by mail. Shirts Galore offer an unlimited return policy while Over the Tops will refund 80 percent of the value of the shirt if you return it. Which of the following statements is most likely to be true? Select one: Shirts Galore's shirts are more likely to be high quality, while Over the Top's shirts are less likely to be high quality a. b. Both companies' shirts are more likely to be high quality С. Shirts Galore's shirts are less likely to be high quality, while Over the Top's shirts are more likely to be high quality d. neither company's shirts are more likely to be high quality
