Suppose an airline needs to consume substantial fuel for its operation. Tom, its finance manager, is concerned that the rising prices of oil will increase the operating costs and eat into the companys profit. He wishes to hedge against that risk by some derivative products.

a. Complete the table below for a long position in a call option with an exercise price of $60 and a premium of $5 per barrel. Ignore the time differential between the initial option expense or receipt and the terminal payoff in your calculations.

Expiration date oil price	Expiration date option payoff	Initial option premium	Combined terminal position value
30
40
50
60
70
80
90

b. Graph the combined terminal position value for part a) above, using net combined terminal position value on the vertical axis and expiration date oil price on the horizontal axis.