Answered step by step
Verified Expert Solution
Question
1 Approved Answer
An oil distributor is planning to sell 100,000 barrels of oil in March (the current future price for March is $90) and wishes to hedge
An oil distributor is planning to sell 100,000 barrels of oil in March (the current future price for March is $90) and wishes to hedge against a possible decline in oil prices. He sold 100 contract , each contract for 1,000 barrels. If at March oil price turns out to be $100. Whats the revenue from oil sales and profit on the futures?
A. Revenue $9,000,000, Profit from futures $0. B. Revenue $10,000,000, Profit from futures -$1,000,000. C. Revenue $10,000,000, Profit from futures $0. D. Revenue $9,000,000, Profit from futures $-200,000.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started