On April 1,2012,Button Industries Enters into an Agreement with Bows

question 12

Essay

On April 1,2012,Button Industries enters into an agreement with Bows Incorporated to lock in the price of cotton.Button agrees to purchase (and Bows agrees to sell)100,000 pounds of cotton at $1.19 per pound,six months from the date of agreement.On October 1,2012,the price of cotton is $1.17 per pound.The contract allows for net settlement.
Required:
Determine the net settlement on the forward contract.

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Definitions:

No-Trade Situation

A scenario in which either due to policy decisions, protectionist measures, or lack of comparative advantage, countries or entities do not engage in international trade with each other.

Domestic Price

The price of goods or services within a country's borders, influenced by local demand and supply conditions.

Shoes

Footwear created to protect and comfort the human foot while doing various activities, also serving as an item of decoration or fashion.

Export

Goods or services produced in one country and sold to buyers in another country.