Your utility company will need to buy 105,000 barrels of oil in 10 days time, and it is worried about fuel costs. Suppose you go long 105 oil futures contracts, each for 1,000 barrels of oil, at the current futures price of $60.00 per barrel. Suppose futures prices change each day as follows

What is the mark-to-market profit or loss (in dollars) that you will have on each date?

Calculate the mark-to-market profit or loss below:

(Round price change to the nearest cent and profit or loss to the nearest dollar.)

DAY	PRICE	PRICE CHANGE	PROFIT & LOSS
1	$59.50
2	$57.50
3	$57.75
4	$58.00
5	$59.50
6	$60.50
7	$60.75
8	$59.75
9	$61.75
10	$62.50

b. What is your total profit or loss after 10 days? Have you been protected against a rise in oil prices?(Select from the drop-down menus.)

Summing the daily profit/loss amounts, the total is a gain of (Select from below)

a. $288,750

b. $315,000

c. $262,500

.

This gain offsets your increase in cost from the overall is :

a. $3.00

b. $2.50

c. $2.75

increase in oil prices over the 10 days, which increases your total cost of oil by:

a. $262,500

b. $288,750

c. $315,000

What is the largest cumulative loss you will experience over the 10-day period? In what case might this be a problem?(Select all the choices that apply.)

A. After the third day, you have lost a total of $236,250.

B. After the second day, you have lost a total of $262,500.

C. After the second day, you have lost a total of $210,000.

D. This loss could be a problem if you do not have sufficient resources to cover the loss. In that case, your position would have been liquidated on day 2, and you would have been stuck with the loss and had to pay the higher cost of oil on day 10.

Problems 1023 63 $62.50 62 $61.75 $60.50 $60.75 e 60 2 59 $59.50 $59.75 58 $57.75 $58.00 $57.50 iE 0 1 23456 78910 Day