1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
lakkis [162]
3 years ago
11

Suppose that the standard deviation of quarterly changes in the prices of a commodity is $0.65, the standard deviation of quarte

rly changes in a futures price on the commodity is $0.81, and the coefficient of correlation between the two changes is 0.8. A three-month contract is used for hedging. Which of the following is true?
A. The size of the futures position should be 64.2% of the size of the company’s exposure in a three-month hedge.
B. The size of the company’s exposure should be 64.2% of the size of the futures position in a three-month hedge.
C. The size of the futures position should be 35.8% of the size of the company’s exposure in a three-month hedge.
D. The size of the futures position should be 99.7% of the size of the company’s exposure in a three-month hedge.
Business
1 answer:
Mice21 [21]3 years ago
5 0

Answer:

The size of the futures position should be 64.2% of the size of the company’s exposure in a three-month hedge.

Explanation:

As given,

The standard deviation of quarterly changes in the prices of a commodity = $0.65

The standard deviation of quarterly changes in a futures price on the commodity =  $0.81

The coefficient of correlation between the two changes = 0.8

Now,

Optimal hedge ratio = 0.8×\frac{0.645}{0.81} = 0.8×0.80 = 0.6419

⇒Optimal hedge = 0.6419 ≈ 0.642 = 64.2 %

⇒The size of the futures position should be 64.2% of the size of the       company’s exposure in a three-month hedge.

You might be interested in
Publications reporting total return data for an investment should use the recommended reporting period of:______.
Bezzdna [24]

 Publications reporting total return data for investment should use the recommended reporting period of 1 year, 5 years, and the lesser of 10 years of the life of the investment

The definition of investment is an asset that is purchased or invested to build wealth and save money from hard-earned income or capital appreciation. The importance of investment is primarily to gain an additional source of income or to make a profit from the investment over a period of time.

Time deposits are primarily investments in banks. A fixed interest rate is paid and the original investment funds are returned to the depositor at maturity. Example: Mr. B deposited her $1 million in her XY bank. XY Bank pays interest at 10% per annum.

Investments generally fall into three main categories: stocks, bonds, and cash equivalents. Each bucket has different types of investments. Here are six types of investments you can consider for long-term growth and what you need to know about each.

Learn more about investment here

brainly.com/question/1305349

#SPJ4

8 0
1 year ago
Locking a cell so that others cannot alter its contents is known as _____.
Readme [11.4K]
I would say the correct answer is cell protection. It is when you prevent others to edit or change the contents of certain cells in a sheet. In doing this, you first unlock all cells. Then, select the cells you want to lock then select the option to lock them. Hope this helped.
8 0
3 years ago
A T-bill quote sheet has 60-day T-bill quotes with a 4.95 ask and a 4.89 bid. If the bill has a $10,000 face value, an investor
In-s [12.5K]

Answer:The correct answer is a). $9,918.50

Explanation: In selling, the investor will use the bid price of $4.89 alongside the face value of the bill.

That is to say, the face value * (1-(bid price * no. of days)/days in a year) = 10000 * (1-(0.0489*60)/360) = $9,918.50

3 0
3 years ago
Read 2 more answers
The EPA requires the use of precise forms called the
Musya8 [376]

Answer:

The correct answer is The EPA requires the use of precise forms called? It is a requirement for those working with or owners of transporters and generators of waste materials deemed hazardous to acquire an EPA form 8700-22 called the uniform hazardous waste manifest.

Explanation:

i hope this helps 229 999 0523

8 0
3 years ago
The treasurer of a major U.S. firm has $40 million to invest for three months. The interest rate in the United States is .28 per
diamong [38]

Answer:

Check the explanation as follows.

Explanation:

a) If it is invested in US

Current= $40 million

Interest rate= 0.28% p.m

Interest for 1 month= $40 million*0.28%= $0.112 million

Interest for 3 months= $0.112*3= $0.336 million

Total value after 3 months= $40 million+$0.336 million = $40336000.

b) If it is invested in Great Britain.

Convert $40 million into Pounds= $40 million*0.639 = Pound 25.56 million

Ivest in Great Britain for 3 months @ 0.32%

Interest per month= 25.56 million*0.32% *3 = 0.245376

Total Pounds after 3 months= Pound 25.805376

Convert into $= 25.805376/0.642 = $40195289.7156

Value if invested in great britain= $40195289.7156

8 0
3 years ago
Other questions:
  • Which of the following is a difference between customized services and standardized services?
    6·1 answer
  • Jose owns a dog whose barking annoys Jose's neighbor Amy. Suppose that the net benefit of owning the dog is worth $400 to Jose a
    13·2 answers
  • 1. Who benefits when a customer purchases strawberries from a store?
    10·1 answer
  • tahir owns and operates a gym. In 2020, he purchased and placed the following new assets into service for his business: March 17
    15·1 answer
  • On June 1, 2021, Royal Property Management entered into a one-year contract to oversee leasing and maintenance for an apartment
    9·1 answer
  • Zachary Manufacturing Company has an opportunity to purchase some technologically advanced equipment that will reduce the compan
    13·2 answers
  • The Marcellus shale is:
    5·1 answer
  • A manufacturing company that produces a single product has provided the following data concerning its most recent month of opera
    14·1 answer
  • The amount of money you earn has nothing to do with your life style budget T F
    11·1 answer
  • WHY DID DABABY BROTHER END HIS LIFE?
    13·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!