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An oil company expects to sell 1 million barrels of oil every year for the next 5 years and wants to lock in the
An oil company expects to sell 1 million barrels of oil every year for the next 5 years and wants to lock in the oil price. (15 points) a. Compute the swap price if the forward prices for oil are 58.7, 59, 59.3, 60 and 60.5 for maturities from 1 to 5 years and the discount rates are 5.5%, 5.8%, 6%, 6.2% and 6.5% for maturities form 1 to 5 years (all with continuous compounding). b. What should be the terms of this swap between the oil company and a swap dealer? c. Explain how the oil company is locking in the oil price
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