Question
In: Finance
Question 6 Mogul oil company will sell 7000 barrels of oil in 3 months. Suppose Mogul...
Question 6
Mogul oil company will sell 7000 barrels of oil in 3 months. Suppose Mogul hedges the risk by selling futures on 7000 barrels of oil. The current oil futures price is $15.6 dollars per barrel. If in 3 months the spot price of oil is $15.0 and the futures price is $15.9 per barrel, what is Mogul's effective price of oil per barrel?
16.5
17.0
14.7
15.3
Question 7
Mogul oil company will sell 9000 barrels of oil in 2 months. Suppose Mogul hedges the risk by selling futures on 7200.0 barrels of oil. The current oil futures price is $21.1 dollars per barrel. If in 2 months the spot price of oil is $20.5 and the futures price is $21.8 per barrel, what is Mogul's gain on the futures transaction and effective price per barrel?
-5040.0 and 21.06
5040.0 and 19.94
5040.0 and 21.06
-5040.0 and 19.94
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Assume that you invest in oil, and you plan to sell 350,000 oil barrels in Dec...
Assume that you invest in oil, and you plan to sell 350,000 oil
barrels in Dec 2020. You think that the price of oil in Dec would
be in the range of $50 – $55 per barrel. Show how would you use the
futures contract to hedge against oil revenue loss (assume each
futures contract calls for the delivery of 1,000 oil barrels and
the current futures price is $52.5 per barrel) or against a future
price reduction (hint: develop...
Assume that you invest in oil, and you plan to sell 350,000 oil barrels in Dec...
Assume that you invest in oil, and you plan to sell 350,000 oil
barrels in Dec 2020. You think that the price of oil in Dec would
be in the range of $50 – $55 per barrel. Show how would you use the
futures contract to hedge against oil revenue loss (assume each
futures contract calls for the delivery of 1,000 oil barrels and
the current futures price is $52.5 per barrel) or against a future
price reduction (hint: develop...
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It is May 15. An oil producer has negotiated a contract to sell
100,000 barrels of crude oil. The price in the contract is the spot
price on August 15. The spot price on May 15 is $60 per barrel and
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Mercantile Exchange (NYMEX) is $59 per barrel. Note that each
futures contract on NYMEX is for the delivery of 1,000 barrels.
A. Explain how he can hedge...
It is May 15. An oil producer has negotiated a contract to sell 100,000 barrels of...
It is May 15. An oil producer has negotiated a contract
to sell 100,000 barrels of crude oil. The price in the contract is
the spot price on August 15. The spot price on May 15 is $60 per
barrel and the crude oil futures price for August delivery on the
New York Mercantile Exchange (NYMEX) is $59 per barrel. Note that
each futures contract on NYMEX is for the delivery of 1,000
barrels.
Explain how he can hedge against...
Suppose that an oil well is expected to produce 12, 00,000 barrels of oil during its...
Suppose that an oil well is expected to produce 12, 00,000
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10, 50 barrels. (a) Suppose that the price of oil is expected to be
$120 per barrel for the next six years. What would be the present
worth of the anticipated revenue trim at an interest rate...
Suppose that an oil well is expected to produce 12, 00,000 barrels of oil during its...
Suppose that an oil well is expected to produce 12, 00,000
barrels of oil during its first production year. However, its
subsequent production (yield) is expected to decrease by 9% over
the previous year's production. The oil well has a proven reserve
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1 dollars per barrel. Find the optimal extraction plan, the
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Assume a zero storage cost and a zero convenience yield.
$-1.57 per barrel
$-10.08 per barrel...
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