5. Suppose that in September 2016 a company takes a long position in a contract on May 2017 crude oil futures. It closes out its position in March 2017. The futures price (per barrel) is $58.30 when it enters into the contract, $60.50 when it closes out the position, and $59.10 at the end of December 2016. One contract is for the delivery of 1,000 barrels. What is the companys profit? When is it realized? How is it taxed if it is (a) a hedger and (b) a speculator? Assume that the company has a December 31 year end.

6. Explain what is meant by a perfect hedge. Does a perfect hedge always lead to a better outcome than an imperfect hedge? Explain your answer.