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Consider the following information. You have purchased 10,000 barrels of oil for delivery in one year at a price of $25/barrel. The rate of change of the price of oil is assumed to be normally distributed with zero mean and annual volatility of 20%. You have a margining agreement in place with the counterparty that requires margin to be paid within two days if the credit exposure becomes greater than $60,000. There are 252 business days in the year. Assuming enforceability of the margin agreement, which of the following is the closest number to the 95%, 1-year credit risk of this deal governed under the margining agreement?
Choose one answer.