Exhibit 14-7
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) $\quad$

question 52

Multiple Choice

Exhibit 14-7
USE THE FOLLOWING INFORMATION FOR THE NEXT 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: - $\quad$ 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.
- $\quad$ PU pays the swap dealer $\$ 57.50$ per barrel.
- The swap dealer pays PU dealer the average NYMEX Oi futures price per barrel.
-Refer to Exhibit 14-7. Describe the transaction that occurs between PU and the swap dealer if the monthly average oil futures settlement price is $58.45.

• A) PU pays the swap dealer $725,000
• B) The swap dealer pays PU $725,000
• C) PU pays the swap dealer $475,000
• D) The swap dealer pays PU $475,000
• E) None of the above.

Recognize various forms of justice, including restorative justice and community justice initiatives.

Identify changes in legal definitions and attitudes towards crime over time.

Examine the principles of the abolitionist movement and critique the prison system.

Understand principles of rehabilitation, reintegration, and deterrence within the criminal justice system.

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Definitions:

Calls

Options contracts that give the holder the right, but not the obligation, to buy a specified amount of an underlying asset at a set price within a defined period.

Step-Variable Cost

Costs that remain fixed for a certain level of production or operations but can change in steps with significant changes in activity level.

True Variable Cost

Costs that vary directly with the level of production or service volume, such as raw materials and direct labor.

Mixed Cost

consists of both fixed and variable components and changes in total with the level of activity, but not proportionally.