Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Suppose that standard deviation of monthly changes in spot prices of live cattle is 1.2 cents per pound of live cattle, and the standard deviation of monthly changes in futures prices or the closing contracts is 1.4 cents per pound of live cattle. The coefficient of correlation between the two changes is 0.8. If a food processing company wants to hedge 500,000 pounds of live cattle and the size of the relevant futures contract on live cattle is 45,000 pounds then
(1) What strategy should a beef producer (user of live cattle) follow? What does it mean?
(2) What is the optimal number of futures contract with no tailing of the hedge?
(3) What is the optimal number of future contract with tailing of the hedge?
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- 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.)arrow_forward9) This is an exercise about financial futures. Can you please check the picture and answer the question? Only one option is right (A, B, C, or D).arrow_forward
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