A corporation signed a futures contract buying 200,000 gallons of gasoline at $2.4 per gallon to...

A corporation signed a futures contract buying 200,000 gallons of gasoline at $2.4 per gallon to be delivered 6 months from today. Six months later, the actual gasoline price was $1.8 per gallon.

Corporation A would ____ by ____ due to signing of the futures contract.

Select one:

A. gain, $0.6

B. lose, 0.6%

C. gain, $120,000

D. lose, $120,000

E. none

Solutions

Expert Solution

Because the prices have fallen, the company is at a situation of loss.

The loss is equal to ($2.4-$1.8)*200000 =$120000.

Hence the correct option is

D. Lose, $120,000.

Rahul Sunny answered 1 year ago

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