A hedger takes a long position in an oil futures contract on November 1, 2016 to hedge an exposure on March 1, 2017. The initial futures price is $60 and each contract is on 1,000 barrels of oil. On December 31, 2016 the futures price is $61. On March 1, 2017 it is $64. The contract is closed out on March 1, 2017. What gain is recognized in the accounting year January 1 to December 31, 2017 (in $)? What is the answer to the question above if the trader is a speculator rather than a hedger (in $)?

A hedger takes a long position in an oil futures contract on November 1, 2016 to hedge an exposure on March 1, 2017. The initial futures price is $60 and each contract is on 1,000 barrels of oil. On December 31, 2016 the futures price is $61. On March 1, 2017 it is $64. The contract is closed out on March 1, 2017. What gain is recognized in the accounting year January 1 to December 31, 2017 (in $)? What is the answer to the question above if the trader is a speculator rather than a hedger (in $)?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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