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On September 1 st you entered into a 3-month forward contract to buy 42,000 gallons of unleaded gasoline at $2.80/gallon. On December 1 st ,
On September 1st you entered into a 3-month forward contract to buy 42,000 gallons of unleaded gasoline at $2.80/gallon. On December 1st, the spot price of unleaded gasoline is $4.00 per gallon,
- What cash settlement from long to short (or short to long) will fairly settle the contract without the involvement of actual gasoline?
- What cash payment should go from long to short in exchange for delivery of the underlying commodity?
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