Problem

On June 1, 2011, TCO enters into a forward agreement with XYZ to buy 100,000 gallons of fu...

On June 1, 2011, TCO enters into a forward agreement with XYZ to buy 100,000 gallons of fuel oil at $2.40 on December 31, 2011. At the time of inception of the forward, the price of fuel oil is $2.45. On December 31, 2011 the price of fuel oil is $2.48. The contract allows for net settlement.

REQUIRED

1. What is the net settlement on the forward contract?

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Solutions For Problems in Chapter 12