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Question: A shipping company expects to purchase 40,000 gallons of diesel fuel every six months. It would like to hedge its diesel costs for the next two years using a commodity swap. The forward price per gallon of diesel in 6, 12, 18 and 24 months is: 1.6608, 1..6950, 1.6711, and 1.6863. The risk free interest rate for a 2-year investment is 1.875%. What will the terms of the swap be?

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