On march 1 the price of oil is 20 and the july futures

Reference no: EM13617059

1.On March 1 the price of oil is $20 and the July futures price is $19. On June l the price of oil is $24 and the July futures price is $23.50. A company entered into futures contracts on March 1 to hedge the purchase of oil on June 1. It closed out its position on June 1.
a. What kind of hedge should it be?
b. What is the effective price paid by the company for the oil?
c. What is the basis risk?
d. What would be the ideal price if the basis risk were zero?

Reference no: EM13617059

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