An automobile manufacturer expects to buy 1,000 tons of stainless steel in 6 months time. To
hedge the cost of the input the producer goes long futures contracts for 700 tons aluminum
at the cost of $2,500 per ton. In 6 months time the price of stainless steel has risen to $2,760
per ton. What will be the total money spent by the manufacturer from the purchase of the
1,000 tons of stainless steel (including any money received or spent to settle the futures
contracts)?
Assume all transaction costs are zero. Enter the entire answer in the answer box (for example,
if the answer is 2,583,010 then enter 2,583,010 rather than 2.583)