Midwest Airlines is short 2 million gallons of jet fuel. Since no jet fuel contract exists, they decide to hedge with crude oil futures. One 42 barrel of crude oil is needed to produce 20 gallons of jet fuel
If one contract is for 1,000 barrels, how many crude oil contracts will they need to properly hedge their exposure?
A)
2,000 contracts
B)
4,200 contracts
C)
20 million contracts
D)
42 million contracts
Answer:
B
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