Month exposure to the price of commodity

Assignment Help Finance Basics
Reference no: EM133117127

Suppose that the standard deviation of monthly changes in the price of commodity A is $1. The standard deviation of monthly changes in a futures price for a contract on commodity B (which is similar to commodity A) is $2. The correlation between the futures price and the commodity price is 0.95. What hedge ratio should be used when hedging a one month exposure to the price of commodity A?

Reference no: EM133117127

Questions Cloud

Method of valuation determine the amount borrowed : 1. A firm is considering two capital structures. Under the first structure, the firm would have 310,000 shares of stock outstanding and no debt. Under the secon
Information for horizon manufacturing corp : 20 million shares of common stock outstanding. The common stock currently sells for $12 per share and has a beta of 2.5
Prevailing interest rate : 1. Given the information in the table below, which of the following statements is true? Assume the cost of capital is 12%.
What is the futures price per unit : The initial margin is $8,500 and the maintenance margin is $6,500. What is the futures price per unit below which there will be a margin call?
Month exposure to the price of commodity : Suppose that the standard deviation of monthly changes in the price of commodity A is $1. The standard deviation of monthly changes in a futures price for a con
Effective price received by company for commodity : On March 1 the price of a commodity is $1,050 and the December futures price is $1,059. A producer of the commodity entered into a December futures contracts on
Correlation between futures price and commodity price : Suppose that the standard deviation of monthly changes in the price of commodity A is $1. The standard deviation of monthly changes in a futures price for a con
What is the theoretical forward price : A one-year long forward contract on crude oil is entered into when the spot price is $60/bbl. and the risk-free rate of interest is 2.00% per annum with continu
Explain the theoretical fair value of the futures contract : What is the theoretical "fair value" of the futures contract? Please enter your answer as a number rounded to three decimal places.

Reviews

Write a Review

Finance Basics Questions & Answers

  What is the clinics average net float

On a typical day, Park Place Clinic writes $1,000 in checks. It generally takes four days for those checks to clear. Each day the clinic typically receives $1,000 in checks that take three days to clear. What is the clinics average net float?

  What was the cash flow to stockholders for the year

If the company paid out $148,500 in cash dividends during 2016, what was the cash flow to stockholders for the year?

  Capm and required return

Bradford Manufacturing Company has a beta of 2.2, while Farley Industries has a beta of 0.75. The required return on an index fund that holds the entire stock market is 13%.

  Calculate monthly payments for loan

Your job at a new company has been working out really well and you have decided to purchase a piece of property with a farmhouse and a barn

  Determining the total annual rent

Assume you are a 6,500 sq. ft. tenant in a retail center. Your lease indicates a base rent of $20.00 psf; CAM pass-throughs and percentage rents at 6% with brea

  Optimal cpa business structure

Which business structure would you select if you were to set up your own CPA practice: a partnership, proprietorship, or corporation? Why? Explain what factors affect your decision.

  What is the equivalent amount today of future liabilities

If Gillian can borrow/invest money at a rate of 2.8% p.a. effective, what is the equivalent amount today of her future liabilities?

  Compare the implications of the mm model with taxes and

compare the implications of the mm model with taxes and bankruptcy costs to the things we discovered by studying the

  Calculate the depreciation using macrs

Compute the depreciation each year under a 5-year straight-line depreciation. Also, calculate the depreciation using MACRS.

  Estimate the value of nabor industries entire company

Estimate the value of Nabor Industries entire company by using the free cash flow valuation model.

  Find the internal rate of return on this investment

(IRR) Your investment advisor has offered you an investment that will provide you with one cash flow of $10,000 at the end of 20 years if you pay premiums.

  Calculate the amount of profit

A leader in your firm has been studying the foreign exchange market for a number of years and believes that she can predict several of the foreign currency exchange rates relative to the U.S. dollar. Calculate the amount of profit (ignoring exchang..

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!

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