Essay
In September of 2011,Gunny Corporation anticipates that the price of heating oil will increase soon,and wishes to lock in a firm price for the winter months.They enter into a forward contract with Selton Industries to buy 100,000 barrels of oil at $160 per barrel in December 2011.Selton's cost of production of the heating oil is $120 per barrel.
Required:
Determine the economic impact of the transaction to Selton (the seller of the heating oil)at the market price levels indicated in the table below,with and without the hedge.
Correct Answer:
Verified
Correct Answer:
Verified
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