User Account

All Pages

How much is optimal hedge ratio

Assignment Help Financial Accounting
Reference no: EM132918831

The formula of optimal hedge ratio isH* = ρ × σp/h
σ

You want to hedge your rice crop of 8,000 bushels in September by corn futures. Each corn futures contract is on 4000 bushels of corn.

Problem a. How much is your optimal hedge ratio? (Facts: Standard deviation of corn futures price is $0.0397. Standard deviation of rice price is $0.0293. The correlation between the two is 0.871. )

Problem b. How many contracts do you need?

Reference no: EM132918831

Questions Cloud

Examine the differences in the treatment of labor : Examine the differences in the treatment of labor between the European and Asian economic models.
What are the forward price and the value of the contract : Six months later, the price of the stock is $77.5 and the risk-free interest rate is still 5%. What are the forward price and the value of the contract?
Operational structures and recommendation : How can you improve the Planning and Budgeting of Shakey's Pizza Asia Ventures Inc. knowing that there has been a major declining phase with their sales and rev
2204THS Tourism Management Principles Assignment : 2204THS Tourism Management Principles Assignment Help and Solution, Griffith University - Assessment Writing Service
How much is optimal hedge ratio : How much is your optimal hedge ratio? (Facts: Standard deviation of corn futures price is $0.0397. Standard deviation of rice price is $0.0293
Discuss a prominent environmental : Discuss a prominent environmental or sustainability practice employed by a company that you believe has been forward thinking and successful in their efforts. H
Explain optic modulation factor : An analog system has a bandwidth of 10 MHz, a photodetector who responsivity is 0.5 A/W (it has no gain) and whose dark current is 1 nA, and a SNR of 50 dB when
Find the profit volume ratio : Find the Profit volume ratio, Break-even point and Margin of Safety at this level, and the effect of 10% decrease in variable costs.
The growing power of mongols : How did India respond to the threat posed by the growing power of the Mongols, Turks, or Muslims?

Reviews

Write a Review

Financial Accounting Questions & Answers

  Damage awards and fines to recognize the expense for period

Several months ago, Welker Chemical Company experienced a hazardous materials spill at one of its plants. As a result, the Environmental Protection Agency (EPA) fined the company $630,000. The company is contesting the fine. In addition, an employee ..

  What can say about which mortgage should choose

You have just purchased a house for $500000, What can you say about which mortgage you should choose if you have a long horizon versus a shorter horizon?

  Find what is the ratio of market value per share to book

If there is $55,600 in earnings available to common shareholders and Monique's stock has a P/E ratio of 28 times EPS, what is the current price of the stock?

  What is amount reported for total liabilities

What is the amount reported for total liabilities and stockholders' equity on December 31? How much cash is being held by GGE Enterprises Inc.?

  Record the sale and cost of goods sold

Problem - Hedge of Firm Commitment: Assume the commodity is sold at the spot rate on August 28. Record the sale and cost of goods sold

  What annual rate of return have earned

What annual rate of return have earned? You started an investment account 10 years ago with $1000, and it now has grown to $5000.

  Determine the value of the cash flow in year seven

Determine the value of the cash flow in year seven. You are offered an investment opportunity that costs you $175,000, has an NPV of ($364.86)

  Calculate sunland net income for sunland corporation

Calculate Sunland's net income for 2020. Income tax expense 31,150. Cost of goods sold 575,000.Retained earnings 371,500. Cash 234,000

  Describe the effect of a stock issuance on paid-in capital

(Learning Objective 2: Describe the effect of a stock issuance on paid-in capital) ARM received $48,000,000 for the issuance of its stock on May 14. The par value of the ARM stock was only $48,000. Was the excess amount of $47,952,000 a profit to ARM..

  Prepare schedule of future taxable and deductible amounts

Brief Exercise 107 Pole Co. at the end of 2015, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income $480,000 Extra depreciation taken for tax purposes (1,056,0..

  Solve the maximum values that could be reported

For each item, calculate the maximum values that could be reported if the impairment loss is reversed on 31 December 2020.

  Show the journal entries needed to correct the errors

Office Furniture bought for $6,000 has been debited to Motor Vehicles account. Show the journal entries needed to correct the errors

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd