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Define a futures contract

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1. Define a futures contract. Describe the basic principles behind the use of futures contracts to manage risk exposures.

2. Breakeven Analysis of Fixed Cost Investment

BEV FC = Fixed cost investment/Unit Margin

Calculate BEV FC for a pair of shoes:

Shoes sales price = $120;

Variable cost = $50;

Fixed cost = $40million

How many pair of shoes must you sell in order to break even?