1. Assume that you will need 1,000 Barrels of oil (you are a finance manager at Delta Airlines), one month from today. The current price of oil is $45.0 / barrel. You expect that the future spot price/barrel could be either, $42.0, $46.0, or $50.0 with equal probability. The 3-month forward rate for oil is $47.0 / Barrel. The price of an at-the-money Call option on oil is $2.50 per barrel. The price of an at-the-money Put option on oil is $2.00 per barrel. Compute the Net Cost of oil for Delta under each of the following scenarios, by filling in the relevant cells:

Net Final Revenue /barrel of oil if you did not hedge

Net Final Revenue /barrel of oil if you used a Forward contract

Net Final Revenue /barrel of oil if you used Call options to hedge

Net Final Revenue /barrel of oil if you used Put options to hedge

Strategy	Spot Price in 3 months = $42.0	Spot Price in 3 months = $46.0	Spot Price in 3 months = $50.0
a) No Hedge: Net Cost of Oil
b) Using Forward Contract: Select one: LONG SHORT (Specify one) Long or Short:
(i) Cost of Oil
(ii) Profit /Loss on Forward
(iii = i + ii) Net Cost (with Forward hedging)
c) Using Call options Contract: Select one: LONG SHORT (Specify) Long or Short:
(i) Cost of Oil
(ii) Profit /Loss on Options
(iii = i + ii) Net Cost (with Call Options hedging)
d) Using Put options Contract: Select one: LONG SHORT (Specify) Long or Short:
(i) Cost of Oil
(ii) Profit /Loss on Options
(iii = i + ii) Net Cost (with Put Options hedging)