Suppose you are concerned about your firm's jet fuel exposure that you need to acquire in November. Further, your analysis suggests the best futures contract to hedge jet fuel is unleaded gasoline. You decided to hedge for 100% of the price exposure. This is September and the spot prices of jet fuel is $1.108 and RBOB gasoline is $1.121. The RBOB gasoline December futures contact on CME is currently priced at $1.141. Assume two months have passed and you want to close your futures position in November. The spot prices of jet fuel and RBOB gasoline in November are $1.131 and $1.156. All prices are quoted per gallon. The November futures price for December RBOB gasoline is $1.183. Which of the following statements is false based on the above in formation? O The gain from the futures hedge is $0.042 per gallon. O The basis in November is -$0.027 O The RBOB gasoline market is in contango. O The basis in October is -$0.033.

Suppose you are concerned about your firm's jet fuel exposure that you need to acquire in November. Further, your analysis suggests the best futures contract to hedge jet fuel is unleaded gasoline. You decided to hedge for 100% of the price exposure. This is September and the spot prices of jet fuel is $1.108 and RBOB gasoline is $1.121. The RBOB gasoline December futures contact on CME is currently priced at $1.141. Assume two months have passed and you want to close your futures position in November. The spot prices of jet fuel and RBOB gasoline in November are $1.131 and $1.156. All prices are quoted per gallon. The November futures price for December RBOB gasoline is $1.183. Which of the following statements is false based on the above in formation? O The gain from the futures hedge is $0.042 per gallon. O The basis in November is -$0.027 O The RBOB gasoline market is in contango. O The basis in October is -$0.033.

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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