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QUESTION 2 In January, an airline company ABC decided to hedge the next year's Jetfuel consumption using a one-year WTI futures contract. When the hedge
QUESTION 2 In January, an airline company "ABC" decided to hedge the next year's Jetfuel consumption using a one-year WTI futures contract. When the hedge was placed, one-year DEC WTI Futures was trading at $70/barrel, the spot price of WTI was $60/barrel, and the spot price of Jet fuel was $67/barrel. When the hedge was closed in December before the maturity of the DEC WTI futures contract, the spot price of WTI was $80/barrel, the DEC WTI futures contract was trading at $80.2/barrel, and the Jet Fuel was trading at $83/barrel. What was ABC's price for Jet Fuel using the long future's cross-hedge? Assume that the entire next year's consumption of Jet fuel was bought in the spot market in December O $ 67/ barrel O $72.6 / barrel O $72.8 / barrel O $ 83 / barrel
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