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The United States Postal Service is planning to buy 1 2 , 6 0 0 , 0 0 0 gallons of refined gasoline in December

The United States Postal Service is planning to buy 12,600,000 gallons of refined
gasoline in December 2023. The current spot price of refined gasoline is $2.50 per gallon and
the current December 2023 futures price is $2.24. Each futures contract is written on 42,000
gallons. What futures position should USPS take to hedge its exposure (i.e., long or short
position and number of contracts)? What is their outcome in the physical market, futures
market, and total outcome if the spot price in December 2023 ends up being $2.12? How
about if the spot price in December 2023 ends up at $2.58?

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