Petrochemical Parfum (PP) is concerned about a possible increase in the price of heavy fuel...
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Accounting
Petrochemical Parfum (PP) is concerned about a possible increase in the price of heavy fuel oil, which is one of its major inputs. If PP could use either options or futures contracts to protect itself against a rise in the price of crude oil, compute the payoffs in each case if the oil price were $50, $60, or $70 a barrel. Assume the current price of oil is $50 per barrel, the futures price is $60, and the option exercise price is $60
Oil price per barrel
Futures Hedged Expense
Options Hedged Expense
$50
$
$
$60
$
$
$70
$
$
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