You need a barrel of oil next month you could either buy, Ask an Expert

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You need a barrel of oil next month. You could either buy the oil today and keep it for a month, wait and buy the oil next month when you need it, you could enter into a futures contract to buy oil at the current futures price $81, or you can pay $2 for a call option that gives you the right to buy oil for $80. The current spot price is $79 and the risk free rate is 2%, and carrying costs are $2. If the price ends up being $84 next month, then you should have ______________.

a) Waited to buy the oil

b) Entered into a futures contract

c) Bought a call option

d) Buy the oil today and store it for a month.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91380307

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