Exxon oil corp is negotiating the purchase of 1 million, Ask an Expert

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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 $0.071. The contract is signed at a price of 1440 Pesos per barrel. Exxon can enter a futures contract that allows the company to purchase Pesos at the exact time of oil delivery at $0.072. If we consider the use of the futures contract to hedge Exxon's foreign exchange risk, how much is the cost of this insurance to Exxon?

Note: Round your answer to the closest $USD.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92767486

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