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Question 3 please. Thank you. 3) Delta utilizes 1,500,000 gallons of jet fuel every month and wants to hedge its position buy entering into a
Question 3 please. Thank you.
3) Delta utilizes 1,500,000 gallons of jet fuel every month and wants to hedge its position buy entering into a swap contract to buy its jet fuel monthly starting in one month for the next 5 months. The risk-free rate for all horizons up to 6 months is 1.25% and the forward price of jet fuel per gallon is listed below. What would be the swap price of the 1,500,000 gallons of jet fuel each month for the next 6 months? Month Forward Price 1 $ 1.7900 2 $ 1.7950 3 $ 1.7975 4 $ 1.8010 5 $ 1.8075Step by Step Solution
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