3. Consider the following information. Assume the November delivery date is in one month. a. What is the annualized net convenience value, 8 - k, between November 04 and December 04 and between March 04 and April 04. Given an intuition for your results. b. Suppose a utility would like to offer their customers a fixed price for natural gas between November 2004 and April 2005. What price they could offer? How would they hedge this position? Natural Gas Futures 10/25/04 Delivery Month Price Annualized % Change in Price Nov 04 8.06 Dec '04 8.99 1.3104 Jan '05 9.50 0.6621 Feb '05 9.48 -0.0253 Mar '05 9.04 -0.5703 Apr '05 7.44 -2.3375 May '05 7.10 -0.5613 Jun '05 7.12 0.0388 Jul '05 7.15 0.0454 Aug '05 7.17 0.0251 Sep 05 7.14 -0.0419 Oct '05 7.15 0.0168 6 Month Annualized T-bill Rate 1.99% 3. Consider the following information. Assume the November delivery date is in one month. a. What is the annualized net convenience value, 8 - k, between November 04 and December 04 and between March 04 and April 04. Given an intuition for your results. b. Suppose a utility would like to offer their customers a fixed price for natural gas between November 2004 and April 2005. What price they could offer? How would they hedge this position? Natural Gas Futures 10/25/04 Delivery Month Price Annualized % Change in Price Nov 04 8.06 Dec '04 8.99 1.3104 Jan '05 9.50 0.6621 Feb '05 9.48 -0.0253 Mar '05 9.04 -0.5703 Apr '05 7.44 -2.3375 May '05 7.10 -0.5613 Jun '05 7.12 0.0388 Jul '05 7.15 0.0454 Aug '05 7.17 0.0251 Sep 05 7.14 -0.0419 Oct '05 7.15 0.0168 6 Month Annualized T-bill Rate 1.99%