One of TWAs largest expenses is for jet fuel which is trading today at $200 per barrel. TWA hedges its risk in jet fuel by entering into futures contracts. TWA has purchased 50 futures contracts for 1,000 barrels each with a margin of $3,500 for each contract and a price per barrel of $205 with deliver in 2 months. 2 points each

If the price of jet fuel moves to $225 per barrel, how much will TWA pay per barrel in 2 months?

___________

b. What is the total amount of margin in TWAs opening position? ___________

c What is the total value of TWAs opening position? _____________

d If the price of jet fuel moves to $235 per barrel, what is the dollar value of the savings from entering into the 50 futures contracts? ______________

e. If the price of jet fuel moves to $215 per barrel, what is the dollar value of the savings from entering into the 50 futures contracts? _________________