What is companys exposure measured in gallons of new fuel

Assignment Help Financial Management

Reference no: EM131235736

1. The expected return on the S&P 500 is 12% and the risk-free rate is 5%. What is the expected return on an investment with a beta of (a) 0.2, (b) 0.5, and (c) 1.4?

2. A company wishes to hedge its exposure to a new fuel whose price changes have a 0.6 correlation with gasoline futures price changes. The company will lose $1 million for each 1 cent increase in the price per gallon of the new fuel over the next three months. The new fuel's price changes have a standard deviation that is 50% greater than price changes in gasoline futures prices. If gasoline futures are used to hedge the exposure, what should the hedge ratio be?

What is the company's exposure measured in gallons of the new fuel? What position, measured in gallons, should the company take in gasoline futures? How many gasoline futures contracts should be traded? Each contract is on 42,000 gallons.

Reference no: EM131235736

Questions Cloud

Why daily settlement of contract give rise to cash flow : A futures contract is used for hedging. -Explain why the daily settlement of the contract can give rise to cash-flow problems.

How the company generates additional awareness : Specifying how the company/organization/team generates additional awareness and exposure through their social media - include 2 concrete "real world" examples with details and explanations on how they accomplish this based on your research.

Horses presenting with colic : A veterinary researcher takes an SRS of 60 horses presenting with colic. The average age of the 60 horses with colic is 12 years. The average age of horses seen at the veterinary clinic was determined to be 10 years. The researcher concludes that ..

Performance of the interconnection networks : Two memory interconnection networks called Omega and Crossbar were compared using simulation. Two different memory address reference patterns called Random and, Matrix were used.

What is companys exposure measured in gallons of new fuel : If gasoline futures are used to hedge the exposure, what should the hedge ratio be? - What is the company's exposure measured in gallons of the new fuel?

Describe the means you would employ to overcome barriers : Describe the means you would employ to overcome barriers to the introduction of new ways of doing business? Comment on how you would manage change once the procedures have been defined.

Significant issues faced currently by the rail-road industry : Which of the design acronyms would be considered independent of DFX? a. DFSS b. DFA c. DFM d. DFS. Discuss ways to use lean to improve one of the following: a pizza restaurant, a hospital, an auto dealership, or your workplace. Which are the several ..

Product out performs the other three : A marketer manages four products, A, B, C, and D. Assuming that the products are similar in all respects, what is the probability that one product out performs the other three in each year of a given three year period?

Fit a regression model and interpret the results : The time to encrypt or decrypt a k-bit record was measured on a uniprocessor as well as on a multiprocessor. The times in milliseconds are shown in Table 15.12. Using a log transformation and the method for categorical predictors, fit a regression..

User Account

All Pages