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It is May and a company knows that it will require 20,000 barrels of crude oil in November. It decides to trade December oil futures,
It is May and a company knows that it will require 20,000 barrels of crude oil in November. It decides to trade December oil futures, whose current price is $41.00 per barrel. One oil futures contract is for delivery of 1,000 barrels. In November, when the company closes its December futures position, the spot price is $42 and the futures price is $44. What is the effective price per barrel paid by the company after taking into account the gains or losses in the futures market?
Select one:
a.$38
b.$40
c.$39
d.$41
e.None of the above
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