Question

Tesla buys a large amount of copper for use in its manufacturing process. Which one of the following is never a potential benefit to Tesla of hedging using copper futures? (Select the answer that isn't a present or later benefit, period. Do not select an answer if it is a benefit that, while possible, is very small or might not be useful right now.)

Group of answer choices

Reduced need for external funds.

Knowing the cost of copper that will be acquired later.

Tax shield related to a net operating loss.

A bid-ask spread on futures.

Answer 1

bid ask spread can not be a benifit for tesla any time because it will be all time in the favor of rate offering party this spread is source of income whose is providing the future contract on such securities and many time such spread amount result into removal of arbitrage opportunity in to maket so such bid ask spread can never be benefit for tesla it will be always in the favor of rate offering party hence the the last option A Bid /Ask Spread on futures is correct answer