Question

Real Corn is $4.00 per bushel, and has a Stand. Dev. = 0.20. Corn Futures have...

Real Corn is $4.00 per bushel, and has a Stand. Dev. = 0.20. Corn Futures have Stand. Dev.= 0.25 , and the correlation between the Real and the Futures is 0.80. One futures contract is for 5000 bushels. (a) What is the optimal hedge ratio for corn use like Kellogg cereal ? (b) If Kellogg expects to need 215,000 bushel of corn, exactly how many contracts should it hedge with AND say which one, Long or Short.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A farmer enters into a short corn futures contract at a price of $2.80 per bushel....
A farmer enters into a short corn futures contract at a price of $2.80 per bushel. The spot price of corn drops to $2.65 when the contract expires. The farmer harvested 13,000 bushels of corn and had futures contracts on only 10,000 bushels of corn. The farmer is obligated to ___ (receive/deliver) the corn when the contract expires. What is the farmer’s total net proceeds if he sold all his corn harvest at the contract’s expiration?  
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT