Frontier Airlines hedged the cost of jet fuel by purchasing options that allowed the airline to buy
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Frontier Airlines hedged the cost of jet fuel by purchasing options that allowed the airline to buy fuel at a fixed price for 2 years. The savings in fuel costs were $140,000 in month 1, $141,400 in month 2, and amounts increasing by 1% per month through the 2-year option period. What was the present worth of the savings at an interest rate of 18% per year, compounded monthly?
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