Question
Exxon Oil Corp. is negotiating the purchase of 1 million barrels of oil from a bankrupt competitor to be delivered and paid for in exactly
Exxon Oil Corp. is negotiating the purchase of 1 million barrels of oil from a bankrupt competitor to be delivered and paid for in exactly 1 year. The oil exporter wants the contract expressed in Mexican Pesos, and the current "in USD" Peso exchange rate is $0.076. The contract is signed at a price of 1430 Pesos per barrel. Exxon can enter a futures contract that allows the company to purchase Pesos at the exact time of oil delivery at $0.077. If we consider the use of the futures contract to hedge Exxon's foreign exchange risk, how much is the cost of this insurance, in U.S. dollars, to Exxon? $ Round your answer to the closest $USD. Do not include a dollar sign or a comma in your answer. For example, an answer of one million four hundred and ten thousand would be entered as 1410000.
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