It is June 8 and a company knows that it will need to purchase 20,000 barrels of crude oil at some time in October or November. Oil futures contracts are currently traded for delivery every month by the CME Group and the contract size is 1,000 barrels. The company therefore decides to use the December contract for hedging and takes a long position in 20 December contracts. The futures price on June 8 is $44.00 per barrel. The company finds that it is ready to purchase the crude oil on November 10. It therefore closes out its futures contract on that date. The spot price and futures price on November 10 are $42.00 per barrel and $41.60 per barrel. a) What is the effective price per barrel and the total price paid at the end? b) Suppose that the company decides to use a hedge ratio of 0.8. How does the decision affect the way in which the hedge is implemented and the results in part (a)?