2. It is June 8 and a company knows that it will need topch e 20,000 barrels of crude oil at some time in October or November. Oil futures contracts are currently traded for delivery every month and the contract size is 1,000 barrels. The company therefore decides to use the December contract for hedging. The futures price of December contract on June 8 is $28.00 per barrel. The company finds that it is ready to purchase the crude oil on November 10. The spot price on November 10 is $27.00 per barrel. On November 10, the company buys oil in the market at spot price and closes the futures contract. The futures price of December contract on November 10 is $27.10 per barrel. What is the effective price paid by the company? Select one: O a $26.10 O b.$28.10 c. $27.10 O d. $27.90

2. It is June 8 and a company knows that it will need topch e 20,000 barrels of crude oil at some time in October or November. Oil futures contracts are currently traded for delivery every month and the contract size is 1,000 barrels. The company therefore decides to use the December contract for hedging. The futures price of December contract on June 8 is $28.00 per barrel. The company finds that it is ready to purchase the crude oil on November 10. The spot price on November 10 is $27.00 per barrel. On November 10, the company buys oil in the market at spot price and closes the futures contract. The futures price of December contract on November 10 is $27.10 per barrel. What is the effective price paid by the company? Select one: O a $26.10 O b.$28.10 c. $27.10 O d. $27.90

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter21: Risk Management

Section: Chapter Questions

Problem 2P

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