Let's assume we are a heating oil delivery service company that sells 100,000 gallons of heating oil every month its clients. The firm wants to hedge its position buy entering into a contract to buy its heating oil each month for the next 4 months. What would be the swap price of the 100,000 gallons of heating oil each month for the next 4-months if the following information is true? (Risk-free rate is provided per annum with continuous compounding)

 

Month         Forward Price     Risk-Free Rate
1                         $2.999            1.50%
2                        $3.019             1.50%
3                        $3.039            1.60%
4                        $3.075             1.75%