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9. Suppose that there are no storage costs for crude oil and the interest rate for borrowing or lending is 5% per annum. How could
9. Suppose that there are no storage costs for crude oil and the interest rate for borrowing or lending is 5% per annum. How could you make money if the June 2020 and December 2020 futures contracts trade at $60.01 and $62.94 per barrel? 10. It is May 15. An oil producer has negotiated a contract to sell 100,000 barrels of crude oil. The price in the contract is the spot price on August 15. The spot price on May 15 is $60 per barrel and the crude oil futures price for August delivery on the New York Mercantile Exchange (NYMEX) is $59 per barrel. Note that each futures contract on NYMEX is for the delivery of 1,000 barrels. A. Explain how he can hedge against the oil price fluctuations? B. Suppose that the spot price on August 15 proves to be is either $69 or $45 per barrel. Discuss about the effect of your hedging strategy at this spot price on August 15. 11. Suppose that you will have to pay 2,000,000 on May 15 to your partner in France. The current exchange rate implied by the futures is $1.35/. How can you lock in this exchange rate regardless of the spot rate at $1.25/ or $1.45/ on the delivery day
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