Exxon Mobil has excess inventory of 60 million barrels of WTI crude oil and the company needs to sell the excess inventory. It is trying to hedge its exposure using futures contract that expires in one year. WTI price has 82% correlation with Nigerian Bonny Light price and 88% correlation with Brent blend oil price. The annualized standard deviation of daily prices of Bonny Light is 0.52 and that of WTI and Brent are 0.45 and 0.42 respectively. How should Exxon Mobil hedge the exposure There is no tailing of hedge. O Short 49.280 million barrel of Bonny Light O Short 49.280 million barrel of Bonny Light O Short 56.574 million barrel of Brent blend O none of these O Long 56.574 million barrel of Brent blend

Exxon Mobil has excess inventory of 60 million barrels of WTI crude oil and the company needs to sell the excess inventory. It is trying to hedge its exposure using futures contract that expires in one year. WTI price has 82% correlation with Nigerian Bonny Light price and 88% correlation with Brent blend oil price. The annualized standard deviation of daily prices of Bonny Light is 0.52 and that of WTI and Brent are 0.45 and 0.42 respectively. How should Exxon Mobil hedge the exposure There is no tailing of hedge. O Short 49.280 million barrel of Bonny Light O Short 49.280 million barrel of Bonny Light O Short 56.574 million barrel of Brent blend O none of these O Long 56.574 million barrel of Brent blend

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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The chart below shows the US Ireasury Yield Curve as of December 16, 2021 (see below). Date 1 1 Mo 2 Mo З Мо 6 Мо 1 Yr 2 Yr 3 Yr 5 Yr 7 Yr 10 Yr 20 Yr 30 Yr 12/16/2021 0.04% 0.06% 0.05% 0.13% 0.26% 0.64% 0.92% 1.19% 1.36% 1.44% 1.91% 1.87% Based on the Treasury Yield Curve shown above, answer the following two questions: A) What unusual feature presents itself in the curve? Please be specific. B). 20-year liquidity premium is 0.70%. Using the liquidity premium theory, what is your forecast of the 10-year rate, 10 years from today? Assume the the 10-year liquidity premium is 0.30% and that the
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Ef 629.
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