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Questions and Answers
What is the standard deviation of changes in the futures price per ounce for Jewelry Company?
The standard deviation of changes in the futures price per ounce for Jewelry Company is 12.86.
How do you compute the optimal hedge ratio for Jewelry Co.?
To compute the optimal hedge ratio for Jewelry Co., you need to divide the covariance of changes in the spot price and changes in the futures price by the variance of changes in the futures price.
Will this be a buying or a selling hedge for Jewelry Co.?
This will be a selling hedge for Jewelry Co.
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