The formula to solve the area for all triangles is Area= Base x Height or A=BxH.
Answer:
The optimal Hedge Ratio is 0.7305.
Step-by-step explanation:
Optimal Hedge ratio is given as
Here
- HR_optimal is the Hedge Ratio for the next 6 months which is to be calculated.
- ε_correlation is the correlation coefficient relating the assets and futures contract whose value is give as $0.86.
- σ_current is the standard deviation of the semiannual changes of the wheat which is given as $0.79
- σ_future is the standard deviation of the changes in the future over the same time period which is given as $0.93
So the Hedge Ratio is given as
So the optimal Hedge Ratio is 0.7305.
To solve this problem you do this:
-first you add 9 to both sides to eliminate the 9
-you then divide by 5 to both sides to get the y by itself
-and your left with y=5