How many contracts vertu needs to buy

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Vertu, a company that produces phones made of gold, plans to buy 100,000 ounces of gold in a year in order to make gold phone casings. In order to hedge the exposure, Vertu has decided to use gold futures. The contract size of each gold futures contract is 100 ounces. The standard deviation of the change in gold futures prices is 14.40%. The standard deviation of the change in the price of gold is 7.20%. The correlation between quarterly changes in the futures price and the spot price of gold is 0.5. How many contracts Vertu needs to buy/sell to hedge its exposure?

Reference no: EM132731510

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