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VARVARA [1.3K]
3 years ago
5

A trader owns 55,000 units of a particular asset and decides to hedge the value of her position with futures contracts on anothe

r related asset. Each futures contract is on 5,000 units. The spot price of the asset that is owned is $28 and the standard deviation of the change in this price over the life of the hedge is estimated to be $0.43. The futures price of the related asset is $27 and the standard deviation of the change in this over the life of the hedge is $0.40. The coefficient of correlation between the spot price change and futures price change is 0.95. (a) What is the minimum variance hedge ratio
Business
1 answer:
VikaD [51]3 years ago
7 0

Answer:

Minimum variance hedge ratio = 1.02125

Explanation:

Given:

Standard deviation of related hedge $0.43

Standard deviation of related hedge = $0.40

Correlation coefficient = 0.95

Find:

Minimum variance hedge ratio

Computation:

Minimum variance hedge ratio = Correlation coefficient[Standard deviation of related hedge / Standard deviation of related hedge ]

Minimum variance hedge ratio = 0.95[0.43/0.40]

Minimum variance hedge ratio = 1.02125

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Milk is an input in the production of cheese, and cheese and bagels are complements. A decrease in the price of milk will ______
alexandr402 [8]

Answer:

The correct answer to the following question is increase in the production of bagel .

Explanation:

Here it is given that milk is an input for cheese , and  also cheese and bagel are complementary goods, which means that there is an negative cross elasticity between cheese and bagel. So therefore when there is an decrease in the price of milk, which will also lead to decrease in price of cheese and thus, as per the negative cross elasticity when the price of one good decreases that means the production or output of other will increase and vice versa will also be true, so therefore the production of bagel would also increase.

5 0
3 years ago
The inflation rate is 12 percent, and the central bank is considering slowing the rate of money growth to reduce inflation to 8
Alenkinab [10]

Answer:

False

Explanation:

economist Kenji supports contractionary monetary policy because he believes that expectations adjust quickly in response to changes in policy and the efforts made by fed( an decrease in government spending and/or an increase in taxes) will be worth and  the costs of reducing inflation will be less.

Whereas economist Eric, thinks that change in money supply is not a good idea to reduce inflation as it will work very slowly.

8 0
3 years ago
Mews Corporation has the following information reported on the balance sheet as of December 31 of the current​ year: Common​ Sto
mr_godi [17]

Answer:

Number common stock shares issued will be 5000

So option (C) will be correct answer.

Explanation:

We have given amount = $60000

Common stock par value = $10

Number of share issued =\frac{60000}{10}=6000

Treasury stock = 1000 shares

We have to find the number common stock shares issued.

Shares of common stock outstanding = number of shares issued - treasury issued = 6000-1000 = 5000 shares

So option (C) will be correct answer  

5 0
4 years ago
1. The reason why the Demand Curve slopes downward is because -
denis23 [38]

Answer:

The right answer is C; There is an inverse relationship between price and quantity demanded

Explanation:

The law of demand indicates that there is an inverse relationship between the price and the quantity demanded of a good.

This means that if the price of a good increases, then demand decreases and if the price decreases, demand tends to rise at the same time.

4 0
4 years ago
quiclet assume a country is running a trade deficit. According to economic theory how would a depreciation of that country's cur
yaroslaw [1]

When the local currency falls in value, imports become more expensive, causing locals to purchase fewer imported goods. Exports, on the other hand, are less expensive to international buyers, so their demand rises. Fewer imports and more exports will reduce the trade deficit and may even result in a surplus.

<h3>What is trade deficit?</h3>

The difference in the monetary value of a country's exports and imports over a given time period is known as the balance of trade, commercial balance, or net exports. A distinction is sometimes made between a trade balance for goods and one for services.

The net-export effect works as follows: A higher price level raises the relative cost of domestic exports to other countries while lowering the relative cost of foreign imports from other countries. As a result, exports fall while imports rise, resulting in a drop in net exports.

The net export variable is critical in calculating a country's GDP. A trade surplus boosts the country's GDP.

To know more about trade deficit follow the link:

brainly.com/question/10276258

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7 0
2 years ago
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