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

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