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You are a crude oil dealer. You intend to buy 100,000 barrels of crude oil in March 2022. Each contract calls for delivery of 1,000 barrels of oil. Current futures price of one barrel of crude oil is $70. You believe that there are only five possible oil prices in December which are $50, $60, $70, $80 and $90. i. Explain what action you would take to protect from changes in oil prices in December. Provide reasons for your action. 2 marks ii. Calculate the total cost for each of the possible price in December. 4 marks Total = 6 marks You are a crude oil dealer. You intend to buy 100,000 barrels of crude oil in March 2022. Each contract calls for delivery of 1,000 barrels of oil. Current futures price of one barrel of crude oil is $70. You believe that there are only five possible oil prices in December which are $50, $60, $70, $80 and $90. i. Explain what action you would take to protect from changes in oil prices in December. Provide reasons for your action. 2 marks ii. Calculate the total cost for each of the possible price in December. 4 marks Total = 6 marks
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Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
Posted Date:
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