. What purchase or sale strategy (including product) would the following people
ID: 400263 • Letter: #
Question
. What purchase or sale strategy (including product) would the following people employ in the futures market?
a. Independent gas station owner concerned about the price of gasoline rising
b. Palladium speculator concerned that a new discovery will weaken prices for the metal
c. Bank risk manager with a sizable bond portfolio who feels that interest rates will soon rise
d. Portfolio manager who has a majority of holdings in small cap stocks and believes they have had a good run and might weaken compared to large caps
Explanation / Answer
a) As the price of gasoline is risin, people will switch from SUVs and trucks to small fuel efficient cars.Thus the demand of gasoline would be there and there would be revenue generation for Independent gas station owners. Thus Independent gas station owners should continue with the same.
b) As the price for the metal weakens,it would rise the demand of Palladium and the jewelery made out of it. Peole will puchase more of jewelery made of Palladium. Thus the owners should wait for the price to come down and then purchase the metal.
c) As the interest rates on bonds will rise soon, Bank risk manager should sell out the bonds in the market otherwise they need to pay high interest on the bonds.
d) Portfolio Manager should start investing in large caps as the large caps would give him more returns in the future
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