Question

The contract size for platinum futures is 50 troy ounces. Suppose you need 350 troy ounces of platinum and the current futures price is $1,035 per ounce. How many contracts do you need to purchase? How much will you pay for your platinum? What is your dollar profit if platinum sells for $1,065 a troy ounce when the futures contract expires? What if the price is $980 at expiration? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest whole number.)

Answer 1

The number of contract is computed as shown below:

= 350 troy ounces / contract size

= 350 troy ounces / 50 troy ounces

= 7 contracts

The payment is computed as shown below:

= $ 1,035 per ounce x 50 troy ounces x 7 contracts

= $ 362,250

Profit if platinum sells for $ 1,065 per ounce is computed as shown below:

= 350 ounces x ($ 1,065 - $ 1,035)

= 350 x $ 30

= $ 10,500

Profit if platinum sells for $ 980 per ounce is computed as shown below:

= 350 ounces x ($ 980 - $ 1,035)

= 350 x - $ 55

= - $ 19,250

Feel free to ask in case of any query relating to this question