Suppose that oil forward prices for 1 year, 2 years, and 3 years are $55,...
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Suppose that oil forward prices for 1 year, 2 years, and 3 years are $55, $52, and $48 per barrel. The 1-year effective annual interest rate is 5.6%, the 2-year interest rate is 6.2%, and the 3-year interest rate is 6.5%. What is the fixed per-barrel price in a 3-year swap that calls for delivery of 5 barrels of oil at the end of the first year, 5 barrels the second year, and 1 barrel the third year?
a. 50.56
b. 45.98
c. 51.82
d. 54.45
e. 43.75
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