Examlex
Exhibit 23.4
Use the Information Below for the Following Problem(S)
Black Gold Industries (BGI) is an independent oil producer with production capacity of 500,000 barrels per month. Due to the cost structure of the business, BGI needs to receive $56.50 per barrel in order to remain solvent. On the other side of this situation is Petrochemicals Unlimited (PU) which uses an average of 500,000 barrels of West Texas crude oil in its normal production operations. The nature of PU's business is such that they will financially suffer if they have to pay more than an average of $57.80 per barrel for oil over the next six years. To hedge against their exposure to volatile oil prices, BI and PU contact a swap dealer to arrange the six-year oil swap described below:
- Settlement is made monthly.
- The notional principal is for 500,000 barrels per month.
- The monthly WTI index value is determined as the average of the daily settlement prices for the crude oil futures contract traded on the New York Mercantile Exchange (NYMEX) .
- The swap dealer pays BGI $57.00 per barrel.
- BGI pays the swap dealer the average NYMEX Oil futures price per barrel.
- PU pays the swap dealer $57.50 per barrel.
- The swap dealer pays PU dealer the average NYMEX Oil futures price per barrel.
-Refer to Exhibit 23.4.Describe the transaction that occurs between BGI and the swap dealer if the monthly average oil futures settlement price is $58.45.
Standard Error
The standard deviation of the sample distribution of a statistic, often used in the context of mean.
Mean
The central or typical value in a distribution, calculated as the sum of all observations divided by the number of observations.
Confidence Interval
A swath of values, taken from statistical analyses of a sample, anticipated to hold within it the value of a not-yet-known population trait.
Standard Error
The standard deviation of the sampling distribution of a statistic, typically the mean.
Q11: The 12b-1 plan permits funds to deduct
Q13: Mutual fund performance studies have shown that
Q19: Refer to Exhibit 22.4.Calculate the payoffs of
Q34: Refer to Exhibit 22.8.Calculate the payoff of
Q40: Refer to Exhibit 25.1.Using the Sharpe Measure,which
Q60: Whereas large hollow blocks encourage gross motor
Q64: All of the following are normal characteristics
Q75: The minimum price of a convertible bond
Q84: Refer to Exhibit 19.3.The interest on one
Q89: Suppose you consider investing $1,000 in a