Consider a risk averse food producer at March 20, 2023 seeking to hedge corn purchases from March 21, 2023 to March 23, 2023. The producer employs corn futures contracts that expire March 31, 2023. An analysis of daily historical data reveals the following Correlation between corn spot and corn futures returns = 0.92 Variance of corn spot returns = 2.2 Variance of corn futures returns = 2.5 The following daily return data is observed over the life of the hedge Date March 21, 2016 March 22, 2016 March 23, 2016 Spot return (%) 1.50 -0.80 2.00 Futures return (%) 1.65 -0.70 1.90 N Σα Σ(X-u)² You are N To calculate variances use the formula for a population: Var(X)==1 not required to tail the hedge To 4 decimal places, which of the following statements is true? (a) The hedged returns over the 3-day period are 0.2403% with a variance of 0.0516%. (b) The hedged returns over the 3-day period are 0.1500% with a variance of 0.0117%. (c) The hedged returns over the 3-day period are -0.2403% with a variance of 0.0516%. (d) The hedged returns over the 3-day period are -0.1500% with a variance of 0.0117%. (e) None of the above 0000

Consider a risk averse food producer at March 20, 2023 seeking to hedge corn purchases from March 21, 2023 to March 23, 2023. The producer employs corn futures contracts that expire March 31, 2023. An analysis of daily historical data reveals the following Correlation between corn spot and corn futures returns = 0.92 Variance of corn spot returns = 2.2 Variance of corn futures returns = 2.5 The following daily return data is observed over the life of the hedge Date March 21, 2016 March 22, 2016 March 23, 2016 Spot return (%) 1.50 -0.80 2.00 Futures return (%) 1.65 -0.70 1.90 N Σα Σ(X-u)² You are N To calculate variances use the formula for a population: Var(X)==1 not required to tail the hedge To 4 decimal places, which of the following statements is true? (a) The hedged returns over the 3-day period are 0.2403% with a variance of 0.0516%. (b) The hedged returns over the 3-day period are 0.1500% with a variance of 0.0117%. (c) The hedged returns over the 3-day period are -0.2403% with a variance of 0.0516%. (d) The hedged returns over the 3-day period are -0.1500% with a variance of 0.0117%. (e) None of the above 0000

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter15: Decision Analysis

Section: Chapter Questions

Problem 4P: Investment advisors estimated the stock market returns for four market segments: computers,...

See similar textbooks

Similar questions

The graph (attached) depicts yield curves for 5 November 2021, 5 November, 2022, and 5 November, 2019. The yield rates are given for each of those in the graph (attached). a) As of 5 November 2021, what is the one-month interest rate expected by market participants in 5 January, 2022? Are they expecting a change in monetary policy within that time frame?
A trader has decided to roll a short hedge forward until December to hedge a long position in corn inventory. The schedule below shows the dates on which trades are made and the prices. a. Determine the effective price at which the corn was sold on December 10. e b. Explain whether the trader would have made more (or less) profit if it had not hedged its inventory position.“ Date Action Sell March Futures Buy March Futurese Sell May Futures Buy May Futuresa Sell July Futuresa Buy July Futuresa Sell September Futurese Buy September Futures Sell December Futures Buy December Futures Sell Cash Inventory Price February 6 March 15e $5.73e $6.20 $5.90 $5.10 $5.30 $5.70 March 15e May 16e May 16 July 22 $6.20 $6.90 $6.95e $6.50 $6.45 July 22e September 17 September 17 December 12e December 12
The answers should be found on the following website; cmegroup . Find the recent quotes for soybean futures. What is the longest maturity for this contract? Is there more trading in the nearer or more distant contracts? Does it cost more to buy soybeans for delivery in the next few months or for later delivery? ( give deeply step wise explaination with type the answer.)
A consultant using three different methods to forecast the value of the cedi vis-à-vis the dollar for the month of December 2019 has come out with these value: Methods Forecast Value Weighted Fundamental 4.3125/$ 50% Technical 4.295/$ 30% Market-Based 4.725/$ 20% Use the mixed forecasting method to find the December estimated value of the cedi in relation to the dollar.
3,On September 26, the spot price of wheat was $3.5225 per bushel and the price of a December wheat futures was $3.64 per bushel. The interest forgone on money tied up in a bushel until expiration is 0.03, and the cost of storing the wheat is 0.0875 per bushel. The risk premium is 0.035 per bushel. a. What is the expected price of wheat on the spot market in December? b. Show how the futures price is related to the spot price. c. Show how the expected spot price at expiration, your answer in part a, is related to the futures price today. d. Show how the expected futures price at expiration is related to the futures price today. e. Explain who earns the risk premium and why.
The graph depicts yield curves for 5 November 2021, 5 November, 2022, and 5 November, 2019. The yield rates are given for each of those in the graph (attached). a) b) As of today, what is the one-month interest rate expected by financial market participants for 5 January, 2022? Does it appear they are expecting changes in monetary policy between now and then?
Given the following information for December 24 corn futures, identify the "In the Money", "At The Money", and "Out of the Money" 22 puts and Calls. The December 24 futures price is $4.71. Also, calculate the intrinsic and extrinsic values of the premiums. 24 25 26 27 28 29 30 31 32 33 34 35 36 37 \table[[Strike,Premium],[Prices,Puts,Monies],[5.2,0.655,Out],[5.1,0.583,In],[5,0.513,At],[4.9,0.447,Out],[4.8,0.386,],[4.7,0.33,],[4.6,0.276,],[4.5,0.227,],[4.4,0.185,],[4.3,0.147,]] \table[[Puts,,],[Intrinsic,Extrinsic,Calls],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,],[,,,]]
A trader has decided to roll a short hedge forward until December to hedge a long position in corn inventory. The schedule below shows the dates on which trades are made and the prices. a. Determine the effective price at which the corn was sold on December 10. e b. Explain whether the trader would have made more (or less) profit if it had not hedged its inventory position. Price $5.73e Date Action February 64 Sell March Futures Buy March Futurese Sell May Futuresa Buy May Futures Sell July Futures< Buy July Futures Sell September Futures Buy September Futurese Sell December Futures $6.20 $5.90 $5.10e $5.30e $5.70 $6.20 $6.90e March 154 March 15e May 16 May 16 July 22e July 22e September 17e September 17 $6.95 $6.50 $6.45e December 12e Buy December Futures Sell Cash Inventory December 12e
In January s of 2018, you took a short position on 100 Feeder Cattle futures contracts that matures in September 2018. The maintenance margin is 60% of the contract size (- 148.05 * 100* 60%) and if your margin goes below the maintenance margin you will get a margin call. Determine the following: 1) Based on futures prices in January 5. what is the market's expectation on future price movements of cattle spots? 2) Based on your position, are you a hodger or a speculator? 3) As of at the end of Apr 2018, is this position profitable? 4) Did you have any margin calls before the end of April? Futures Jaruary 5, 2018) in uS. Fed Cattle February 2018 April 2018 June 2018 August 2018 October 208 December 2018 Close 122.25 Change 0.00 108 Close 149.03 145.55 145.83 Change 343 333 315 Feeder Cattle January 2018 March 2018 April 2018 May 2018 August 2018 September 2018 12383 114.85 102 1173 130 145.48 3.30 112.95 115.08 173 145 148.48 148.05 2.40 2.18 Feeder Cattle Sot Price FER CA 120 an 27 A…
You are given the following partial covariance and correlation tables from historical data: Securities J K Market Securities J K Market 1.24 1.11 1.17 1.03 Covariance Matrix K 0.90 J 0.0020480 0.0021600 Also, you have estimated that the market's standard deviation is 4.3 percent. For the coming year, the expected return on the market is 14.0 percent and the risk-free rate is expected to be 4.0 percent. Given this information, determine the beta for Security K for the coming year, assuming CAPM is the correct model for required returns. Correlation Matrix K 0.60 1.00 0.90 1.00 0.60 0.80 Market 0.0020480 0.0021600 Market 0.80 0.90 1.00 Ston sharing Hidel lines We
Use the following output from a market model regression of the weekly percentage returns on the AIG commodities index on a market index to answer questions a. - f. a. What is the formula for the Commodities Index' characteristic line? b. You forecast a market return of 1.0% for next week. What is next week's expected return for the commodities index? c. What is the correlation between the return on the commodities index and the return on the market Index? d. How much of the variation in the commodities index's returns are explained by the model? e. Based on these regression results, the commodities index would be considered what kind of an investment? f. Does this regression have much explanatory power? Why or why not?
An analyst gathered the following year-end price level data for an economy: 2014 2018 2019 a. What is the economy's annual inflation rate for 2019? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Inflation rate 178 194.3 200.8 Average rate % b. What is the average compounded inflation rate for 2014-2019? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) %