Question
As CFO of the OK Oil Co you expect to have produced 10,000 barrels of oil to sell in May, 2021. You are concerned that
As CFO of the OK Oil Co you expect to have produced 10,000 barrels of oil to sell in May,
2021. You are concerned that the spot price of oil may drop from the current price you are
receiving of $53 per barrel. You sell ten NYMEX WTI Light Sweet Crude Oil futures contracts in
units of 1,000 barrels per contract for May delivery at $51.94 per barrel. On the settlement date
of the contracts, the spot price you can receive for the oil is $54.50. What is your gain or loss
from hedging?
Step by Step Solution
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Step: 1
To calculate the gain or loss from hedging we need to compare the difference between the s...
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Microeconomics An Intuitive Approach with Calculus
Authors: Thomas Nechyba
1st edition
538453257, 978-0538453257
