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DO NOT COPY PASTE EARLIER ANSWERS!!! I WILL REPORT SPAM!!! IF YOU ARE CONFIDENT ABOUT THE ANSWER THEN ONLY ANSWER IT OR ELSE STAY AWAY
DO NOT COPY PASTE EARLIER ANSWERS!!! I WILL REPORT SPAM!!! IF YOU ARE CONFIDENT ABOUT THE ANSWER THEN ONLY ANSWER IT OR ELSE STAY AWAY FROM THE QUESTION!!!
6. Assume that you will have 1 Barrel of oil (you are a finance manager at BP which sells oil), one month from today. The current price of oil is $86.0 / barrel. You expect that the future spot price/barrel could be either, $80.0, $96.0, or $106.0 with equal probability. The 1-month forward rate of oil is $97.0 / Barrel. The price of an at-the-money Call option on oil is $10.0 per barrel. The price of an at-the-money. Put option on oil is $12.0 per barrel. Compute the Net revenue from oil for BP under each of the following scenarios, by filling in the following table. [20 pts.) Strategy Spot Price in 1 month Spot Price in 1 month = $96.0 $80.0 Spot Price in 1 month $106.0 1) No Hedge: Net Revenue 2) Using Forward Contract (Specify) Long or Short (i) Revenue from Oil (i) Profit/Loss on Forward (iii = i + ii) Net Revenue (with Forward hedging) 3) Using Call options Contract (Specify) Long or Short (i) Revenue from Oil (ii) Profit/Loss on Options (iii = i + ii) Net Revenue (with Call hedging) 4) Using Put options Contract (Specify) Long or Short (i) Revenue from Oil (ii) Profit/Loss on Options (iii = i + ii) Net Revenue (with Put hedging)Step by Step Solution
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