Exxon Oil Corp. is negotiating the purchase of 1 million barrels of oil from a...
80.2K
Verified Solution
Link Copied!
Question
Finance
Exxon Oil Corp. is negotiating the purchase of 1 million barrels of oil from a bankrupt competitor to be delivered and paid for in exactly 1 year. The oil exporter wants the contract expressed in Mexican Pesos, and the current "in USD" Peso exchange rate is $0.074. The contract is signed at a price of 1445 Pesos per barrel. Exxon can enter a futures contract that allows the company to purchase Pesos at the exact time of oil delivery at $0.075. If we consider the use of the futures contract to hedge Exxon's foreign exchange risk, how much is the cost of this insurance, in U.S. dollars, to Exxon? $ Round your answer to the closest $USD. Do not include a dollar sign or a comma in your answer. For example, an answer of one million four hundred and ten thousand would be entered as 1410000
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
