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How would use forward contracts to hedge the risk of oil

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Reference no: EM132935761

Problem 1: If you are manufacturing consumer products that use oil-based chemicals as inputs, then you are subject to oil price risk. Suppose you order your oil from Saudi Arabia and usually pay for it in Saudi rials. You are now concerned that the appreciation in the rial will affect your profitability. How would you use forward contracts to hedge the risk of your oil purchases?

Reference no: EM132935761

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