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OU Energy Company is trying to manage the risk associated with crude oil prices. The current spot price for crude oil is $100. After evaluating what OU believes will happen with crude oil prices, they enter into a Forward contract with Samantha Oil. The terms of the Forward are that OU has agreed to buy 10,000 barrels of oil one year from today from Samantha Oil. The current cost of storing oil like this is $1.50 per barrel per quarter - payable at the beginning of each quarter. The current risk - free interest rate is 3%

What is the correct forward price for this deal?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M93044364

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