It is June 8. A company knows that it will need to purchase 30,000 barrels of crude oil sometime in October or November. The current September oil futures price is S55.00 per barrel and the current December oil futures price is S56 per barrel. Suppose the spot price on November 10 is $54 per barrel and that is the time you decide to take oil position (one oil futures contract =1,000 barrels) and December futures price is $55 on November 10.

a. What futures contract should be used for hedging purposes?

b. What will be the net cost of oil if you take a long position in December oil futures contracts on November 27 at a futures price of $56?

C. Suppose that in the previous problem, the company decides to use a hedge ratio of 0.6. How does the decision affect the way in which the hedge is implemented and the result? ***********(ANSWER PART "C" QUESTION)********