A firm enters into a one-year forward contract to buy refined oil.To hedge itself,the firm simultaneously sells one-year futures contracts on crude oil.In which of the following scenarios might the firm come under cash flows pressure related to these contracts?
A) Oil prices plummet a day before the maturity of the contracts
B) Oil prices skyrocket a day before the maturity of the contracts
C) Oil prices plummet a day after the firm enters the contracts
D) Oil prices skyrocket a day after the firm enters the contracts
Correct Answer:
Verified
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