Exxon Oil Corp. is negotiating the purchase of 1 million barrels of oil from a bankrupt competitor to be delivered and p

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Exxon Oil Corp Is Negotiating The Purchase Of 1 Million Barrels Of Oil From A Bankrupt Competitor To Be Delivered And P 1 (41.1 KiB) Viewed 13 times

Exxon Oil Corp. is negotiating the purchase of 1 million barrels of oil from a bankrupt competitor to be delivered and paid for in exactly 1 year. The oil exporter wants the contract expressed in Mexican Pesos, and the current "in USD" Peso exchange rate is $0.076. The contract is signed at a price of 1405 Pesos per barrel. Exxon can enter a futures contract that allows the company to purchase Pesos at the exact time of oil delivery at $0.077. If we consider the use of the futures contract to hedge Exxon's foreign exchange risk, how much is the cost of this insurance, in U.S. dollars, to Exxon? Round your answer to the closest $USD. Do not include a dollar sign or a comma in your answer. For example, an answer of one million four hundred and ten thousand would be entered as 1410000.