Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Your utility company will need to buy 125,000 barrels of oil in 10 days' time, and it is worried about fuel costs. Suppose you go

Your utility company will need to buy 125,000 barrels of oil in 10 days' time, and it is worried about fuel costs. Suppose you go long 125 oil futures contracts, each for 1,000 barrels of oil, at the current futures price of $130.00 per barrel. Suppose futures prices change each day as follows:

image text in transcribed

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

b. What is your total profit or loss after 10 days? Have you been protected against a rise in oil prices?

c. What is the largest cumulative loss you will experience over the 10-day period? In what case might this be a problem?

Part 1

a. 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

$129.50

$

$

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

A Practical Guide To Quantitative Finance Interviews

Authors: Xinfeng Zhou

1st Edition

1735028800, 978-1735028804

More Books

Students also viewed these Finance questions

Question

What teacher supports and services are needed? (D2, D7, D8)

Answered: 1 week ago