Assume that you will require 1,000 Barrels of oil (you are a finance manager at Delta), one month from today. The current price of oil is $80.00 / barrel. You expect that the future spot price/barrel could be either, $85.00, $90.00, or $95.00 with equal probability. The 1 month forward rate oil is $92.00 / Barrel. Compute the Net cost of oil for the following under each of the three scenarios.

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

Net Final Cost /barrel of oil if you did not hedge, i.e. buy from open market after 1 month.

What should your optimal strategy should be and why

Summarize your answers in the table below

Strategy	Spot Price in 1 month = $85.00	Spot Price in 1 month = $90.00	Spot Price in 1 month = $95.00
a) Using Forward Contract
Cost of Oil
Profit /Loss on Forward
Net Cost of Oil (with Forward hedging)
b) No Hedge