What is the optimal hedge ratio for the six month contract

Assignment Help Financial Management
Reference no: EM132018829

Suppose the scenario that the standard deviation of semiannual changes in the price of wheat is $.79, the standard deviation of changes in the futures contract on wheat over the same time period is $.93, and the correlation coefficient relating the asset and futures contract is .86.

What is the optimal hedge ratio for the six month contract on wheat? Describe the significance of this. Please show work.

Reference no: EM132018829

Questions Cloud

Detremine what arbitrage would you undertake : Suppose you observe a 6-month price of forward price of 1133. What arbitrage would you undertake?
Find the value today of the payment received in 2 years : Suppose you were selling your home. A buyer has offered to pay you $115,000 now and another $85,000 in 2 years.
Find the bid quote for euros in terms of yen : Suppose the spot quotes for the Japanese yen and euros are $.0073-81 and $1.125-45, respectively. Round intermediate calculations to four decimal places.
Which currency is expected to appreciate in value : Is the U.S. dollar selling at a premium or a discount relative to the Canadian dollar?Which currency is expected to appreciate in value?
What is the optimal hedge ratio for the six month contract : What is the optimal hedge ratio for the six month contract on wheat? Describe the significance of this. Please show work.
Find the amount of additional funds will the company need : The firm also has a profit margin of 5 percent, a retention ratio of 10 percent, and expects sales of $82 million next year.
What is the value today of the payment received in : What is the value today of the payment received in 2 years, given your required rate of return is 7 percent?
How much would be available from it at the end of 10 years : Suppose you save $5,000 per year in an account paying 5% per year compounded continuously for the next 5 years.
What is the capm beta of the portfolio : What is the expected return on a portfolio that has $6,000.00 invested in the risk-free security and $4,000.00 invested in the market portfolio?

Reviews

Write a Review

Financial Management Questions & Answers

  Using discounted cash flow approach-what is cost of equity

The earnings, dividends, and common stock price of Shelby Inc. are expected to grow at 4% per year in the future. Shelby's common stock sells for $26.25 per share, its last dividend was $1.50, and the company will pay a dividend of $1.56 at the end o..

  What is the tvc of this firm at its target profit level

Suppose it costs BUS-104 Electronics, Inc. $27.5 on average to hire labor and capital to produce an external hard drive.

  State of economy probability and economy portfolio return

Consider the following information: State of Economy Probability of State of Economy Portfolio Return If State Occurs: Calculate the expected return.

  What final payment will the bank require you to make

You have a loan outstanding. It requires making four annual payments of $1,000 each at the end of the next four years.

  Calculate the contribution margin as percent

Calculate the contribution margin in dollars. Calculate the breakeven point in dollars. Calculate the contribution margin as a percent.

  Finances its assets with debt

Jay Lo Enterprises finances its assets with 60 percent debt, 10 percent preferred stock, and 30 percent common stock.

  Evaluating alternative routes for new road

A state-sponsored Forest Management Bureau is evaluating alternative routes for a new road into a ormerly inaccessible region. Three mutually exclusive plans for routing the road provide different benefits, indicated in Table P10-19. The roads are as..

  Disposition effect is the tendency of individual investors

Disposition effect is the tendency of individual investors to

  Annual coupon rate paid semi annually

A few years ago Spider Web INC issued bonds with a 8.23 percent annual coupon rate paid semi annually. The bonds have a par value of $1000 a current price of $1092 and will mature in 20 years. What would the annual yield to maturity be on the bond if..

  Company using the fama-french three-factor model

An analyst has modeled the stock of a company using the Fama-French three-factor model.

  What are the projected sales for last year before sale

CelebNav, Inc. had sales last year of $745,000, What are the projected sales for the last year before the sale?

  What is the last date on which the irs can assess

Mrs. Fugate, who is divorced, failed to include $28,000 alimony on her 2014 Form 1040. The only income she reported was her $78,000 salary. She filed her return on January 19, 2015. a. What is the last date on which the IRS can assess additional tax ..

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