Today is 11/29/1973. You have a contract to sell 100,000 units of the commodity to a customer on 12/27/1973 at the spot price. Your risk management department is charged with the decision: to hedge or not to hedge. Choices: A. Let float (not hedge at all) B. Sell a swap to a dealer, currently quoted Bid 115, Ask 120, on any amount up to 100,000 units

If you choose A, then on 12/27/1973, you will deliver 100,000 units of the commodity and receive the spot price

If you choose B, then on 12/27/1973, you will deliver 100,000 units of the commodity and receive the spot price, and you will pay the spot price to the swap dealer and receive the fixed price from the dealer on the number of units hedged.

Note: You predict that the price will be higher than $120 per unit. Do you hedge or not?