Imagine American Airlines (AA) is concerned about fuel prices rising in the minimize price risk, AA enters an agreement with a swap dealer in which it will pay the swap dealer a fixed payment of $85/bbl on July 15th 2024, in exchange for a variable payment from that swap dealer in the future which will be the August 2024 futures price on July 15th of 2024. Imagine that on July 15th of 2024, the futures price is equal to $75/bbl and the cash price is $75/bbl. In this case, what would be the net price the AA pays for crude oil in $/bbl? Ignore transaction fees. Enter your answer as a number to two decimal places. That is, if you believe the net price paid for crude oil is $21.12/bbl, enter "21.12" as your answer.
Imagine American Airlines (AA) is concerned about fuel prices rising in the minimize price risk, AA enters an agreement with a swap dealer in which it will pay the swap dealer a fixed payment of $85/bbl on July 15th 2024, in exchange for a variable payment from that swap dealer in the future which will be the August 2024 futures price on July 15th of 2024. Imagine that on July 15th of 2024, the futures price is equal to $75/bbl and the cash price is $75/bbl. In this case, what would be the net price the AA pays for crude oil in $/bbl? Ignore transaction fees. Enter your answer as a number to two decimal places. That is, if you believe the net price paid for crude oil is $21.12/bbl, enter "21.12" as your answer.
Chapter5: Currency Derivatives
Section: Chapter Questions
Problem 3BIC
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Transcribed Image Text:Imagine American Airlines (AA) is concerned about fuel prices rising in the
minimize price risk, AA enters an agreement with a swap dealer in which it will pay the
swap dealer a fixed payment of $85/bbl on July 15th 2024, in exchange for a variable
payment from that swap dealer in the future which will be the August 2024 futures price
on July 15th of 2024. Imagine that on July 15th of 2024, the futures price is equal to
$75/bbl and the cash price is $75/bbl. In this case, what would be the net price the AA pays
for crude oil in $/bbl?
Ignore transaction fees. Enter your answer as a number to two decimal places. That is, if
you believe the net price paid for crude oil is $21.12/bbl, enter "21.12" as your answer.
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