In: Finance
On the 1st of March, a commodity’s spot price is $60 and its futures contract price with maturity in August is $59.
On the 1st of July, the commodity spot price is $64 and its futures contract price with maturity in August is $63.50. A company entered into the futures contracts on 1st of March to hedge its purchase of the commodity on July 1. It closed out its position on July 1.
What is the effective price (after taking account of hedging) paid by the company?
a)$59.50
b)$60.50
c)$61.50
d)$63.50