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Calculate the total cost for each of the possible price

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Question - You are a crude oil dealer. You intend to sell 500,000 barrels of crude oil in December 2022. Each contract calls for delivery of 2,000 barrels of oil. Current futures price of one barrel of crude oil is $90. You believe that there are only five possible oil prices in December which are $70, $80, $90, $100 and $110.

Required -

i. Explain what action you would take to protect from changes in oil prices in December. Provide reasons for your action.

ii. Calculate the total cost for each of the possible price in December.

Reference no: EM133186292

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