23. KCB, Corp. wants to set up a hedge on its expected February purchase of 500,000 barrels of crude oil. KCB plans to use the March crude oil futures contract to hedge its purchase. The current spot price for crude oil is 94.65 and the current March crude oil futures price is 95.47.

a. In February when KCB makes its crude oil purchase and unwinds its hedge the crude oil spot price is 92.32 and the March futures price is 92.88. What would be KCBs profit/loss on its futures position?

b. What is the effective cost per barrel KCB pays for its crude oil?

c. Did the basis widen or narrow from the time KCB opened its futures position to the time it closed its position?

d. Suppose instead that in February the spot price is 96.47 and the March futures price is 96.81. What is the effective price per barrel KCB pays for its crude oil?