Question

Tyler buys a futures contract from Alex that gives him the right to buy 1,000 barrels of oil at $125 per barrel in 48 months. What happens in 48 months if the actual price per barrel of oil is $100? Group of answer choices Alex must give Tyler $10,000. The contract becomes void because the price turned out lower than expected. Tyler must pay Alex $25,000. Tyler makes a profit of $25 per barrel, or $25,000.

Answer 1

Answer: Tyler must pay Alex $25,000.

Explanation:

This is a Futures contract which means that there must be a settling of losses and profits. Tyler went into a contract with Alex in which Tyler would buy oil from him at $125 a barrel in 48 months.

In 48 months however, the price is $100 per barrel. This means that Tyler would be paying $25 more for the barrel than it is worth.

Seeing as there are 1,000 barrels that comes to,

= $25 * 1,000

= $25,000

Tyler must therefore pay this $25,000 to Alex to settle the contract.

Answer 2

If the actual price per barrel of Oil  is $100 in 48 months, than the option C is correct.

Future Contract

The Objective of the Future Contract is to settle the issue of profit and loss sharing. In the given question we know that, Tyler would buy oil from him at $125 a barrel in 48 months.

But the actual price oil is $100 per barrel, hence Tyler would be paying $25 more.

There are 1000 barrels whith exceeding cost by $25 per barrel, hence Tyler would be giving = 1000 × 25 = $25000. Therefore, the Option C  "Tyler must pay Alex $25,000" is correct.

Learn More about Future Contract here:

https://brainly.com/question/1193397