1.On March 1 the price of oil is $60 and the July futures price is $59. On June 1 the price of oil is $64 and the July futures price is $63.20. A company entered into a futures contracts on March 1 to hedge the purchase of oil on June 1. It closed out its position on June 1. After taking account of the cost of hedging, what is the effective price paid by the company for the oil?

2.On March 1 the price of gold is $1,295 and the December futures price is $1,315. On November 1 the price of gold is $1280 and the December futures price is $1285. A gold producer entered into a December futures contracts on March 1 to hedge the sale of gold on November 1. It closed out its position on November 1. After taking account of the cost of hedging, what is the effective price received by the company for the gold?

3.Suppose that the standard deviation of monthly changes in the price of commodity A is $2. The standard deviation of monthly changes in a futures price for a contract on commodity B (which is similar to commodity A) is $3. The correlation between the futures price and the commodity price is 0.9. What hedge ratio should be used when hedging a one month exposure to the price of commodity A