QUESTION 14 Suppose that the standard deviation of monthly changes in the price of commodity A...

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QUESTION 14 Suppose that the standard deviation of monthly changes in the price of commodity A is 0.4. The standard deviation of monthly changes in a futures price for a contract on commodity B (which is similar to commodity A) is 0.5. The correlation between the futures price and the commodity price is 0.8. What hedge ratio should be used when hedging exposure to the price of commodity A? O A. 0.25 OB. 0.32 OC. 0.64 OD. 0.80 QUESTION 15 A company has 10,000 units of commodity A to sell on Oct. The firm decide to hedge with a contract on commodity B (which is similar to commodity A). The optimal hedge ratio is 1.2. The futures price for a contract on commodity B is $90. The size of one Futures contract on commodity B is 1000 units. What trade is necessary? O A. Long 10 contracts OB. Short 10 contracts O C. Long 12 contracts O D. Short 12 contracts QUESTION 16 An interest rate is 6% per annum with continuous compounding. What is the present value of 100 that receive in 3 years? O A. $83.53 B. $83.96 O C. $94.18 OD. $94.34 QUESTION 14 Suppose that the standard deviation of monthly changes in the price of commodity A is 0.4. The standard deviation of monthly changes in a futures price for a contract on commodity B (which is similar to commodity A) is 0.5. The correlation between the futures price and the commodity price is 0.8. What hedge ratio should be used when hedging exposure to the price of commodity A? O A. 0.25 OB. 0.32 OC. 0.64 OD. 0.80 QUESTION 15 A company has 10,000 units of commodity A to sell on Oct. The firm decide to hedge with a contract on commodity B (which is similar to commodity A). The optimal hedge ratio is 1.2. The futures price for a contract on commodity B is $90. The size of one Futures contract on commodity B is 1000 units. What trade is necessary? O A. Long 10 contracts OB. Short 10 contracts O C. Long 12 contracts O D. Short 12 contracts QUESTION 16 An interest rate is 6% per annum with continuous compounding. What is the present value of 100 that receive in 3 years? O A. $83.53 B. $83.96 O C. $94.18 OD. $94.34

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Question 14 Answer C 064 The hedge ratio should be 064 when hedging exposure to the price of commodi... View the full answer