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All main topics / Finance & Investment / Derivatives / Derivatives
30
A speculator takes a long position in a futures contract on a commodity on November 1, 2012 to hedge an exposure on March 1, 2013. The initial futures price is $60. On December 31, 2012 the futures price is $61. On March 1, 2013 it is $64. The contract is closed out on March 1, 2013. What gain is recognized in the accounting year January 1 to December 31, 2013? Each contract is on 1000 units of the commodity.

A. $0
B. $1,000
C.$3,000
D.$4,000
Answer: C

In this case there is no hedge accounting. Gains or losses are accounted for as they are accrued. The price per unit increases by $3 in 2013. The total gain in 2013 is therefore $3,000.
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Flashcard info:
Author: CoboCards-User
Main topic: Finance & Investment
Topic: Derivatives
Published: 27.10.2015

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