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Today, an oil producer signs a contract to sell refinery RR 80,000 barrels of crude oil in 6 months at the spot price on that

Today, an oil producer signs a contract to sell refinery RR 80,000 barrels of crude oil in 6 months at the spot price on that day.

RR decides to hedge using NYMEX futures for delivery in 7 months trading today for $80/barrel and employing the hedge ratio h = .7. Every NYMEX crude oil futures covers 1,000 barrels.

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