# Question

Suppose you are selecting a futures contract with which to hedge a portfolio. You have a choice of six contracts, each of which has the same variability, but with correlations of −0.95, −0.75, −0.50, 0, 0.25, and 0.85. Rank the futures contracts with respect to basis risk, from highest to lowest basis risk.

## Answer to relevant Questions

Suppose the current exchange rate between Germany and Japan is 0.02 =C/¥. The euro-denominated annual continuously compounded risk-free rate is 4% and the yen-denominated annual continuously compounded risk-free rate is 1%. ...Suppose the stock price is $35 and the continuously compounded interest rate is 5%. a. What is the 6-month forward price, assuming dividends are zero? b. If the 6-month forward price is $35.50, what is the annualized forward ...Using Table 6.6, what is your best guess about the current price of gold per ounce? a. Suppose that you want to borrow a widget beginning in December of Year 0 and ending in March of Year 1. What payment will be required to make the transaction fair to both parties? b. Suppose that you want to borrow a ...Consider the implied forward rate between year 1 and year 2, based on Table 7.1. a. Suppose that r0(1, 2) = 6.8%. Showhowbuying the 2-year zero-coupon bond and borrowing at the 1-year rate and implied forward rate of 6.8% ...Post your question

0