On June 6, 2021, firm ABC has a contract to sell 1,000 barrels of crude oil on November 17, 2021. ABC uses a hedge with one WTI NYMEX DEC futures. The DEC Futures traded on June 6, 2021 for $89/barrel. A. What type of hedge will company ABC open? B. On November 17, 2021 the crude spot price is $82/barrel and the DEC Futures is trading for $83.50/barrel. ABC sells the 1,000 barrels in the spot market and closes its hedge. Calculate the price per barrel ABC receives.
On June 6, 2021, firm ABC has a contract to sell 1,000 barrels of crude oil on November 17, 2021. ABC uses a hedge with one WTI NYMEX DEC futures. The DEC Futures traded on June 6, 2021 for $89/barrel. A. What type of hedge will company ABC open? B. On November 17, 2021 the crude spot price is $82/barrel and the DEC Futures is trading for $83.50/barrel. ABC sells the 1,000 barrels in the spot market and closes its hedge. Calculate the price per barrel ABC receives.
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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On June 6, 2021, firm ABC has a contract to sell 1,000 barrels of crude oil on November 17, 2021. ABC uses a hedge with one WTI NYMEX DEC futures. The DEC Futures traded on June 6, 2021 for $89/barrel.
A. What type of hedge will company ABC open?
B. On November 17, 2021 the crude spot price is $82/barrel and the DEC Futures is trading for $83.50/barrel. ABC sells the 1,000 barrels in the spot market and closes its hedge.
Calculate the price per barrel ABC receives.
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