Use the Information for the Question(s)below

question 20

Multiple Choice

Use the information for the question(s) below.
As an oil refiner,you are able to produce $76 worth of unleaded gasoline from one barrel of Alaska North Slope (ANS) crude oil.Because of its lower sulfur content,you can produce $77 worth of unleaded gasoline from one barrel of West Texas Intermediate (WTI) crude.
-Another oil refiner is offering to trade you 10,150 Bbls of Alaska North Slope (ANS) crude oil for 10,000 Bbls of West Texas Intermediate (WTI) crude oil.Assuming you just purchased 10,000 Bbls of WTI crude at the current market price,the total benefit (cost) to you if you take the trade is closest to:

• A)$730,600
• B)$770,000
• C)$771,400
• D)$773,908
• E)$775,000

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Definitions:

Coupon Rate

The interest rate stated on a bond when it's issued which indicates the percentage of the principal to be paid annually as interest.

Intrinsic Value

The actual, fundamental worth of an asset, calculated based on an objective analysis of underlying factors.

Conversion Ratio

The specific number of shares of stock that a holder can convert a convertible security into.

Market Conversion Value

The worth of a convertible security if it were to be converted into shares of the underlying stock, typically at the current market price of the shares.