Suppose That the Standard Deviation of Monthly Changes in the Price

question 1

Multiple Choice

Suppose that the standard deviation of monthly changes in the price of commodity A is $2.The standard deviation of monthly changes in a futures price for a contract on commodity B (which is similar to commodity A) is $3.The correlation between the futures price and the commodity price is 0.9.What hedge ratio should be used when hedging a one month exposure to the price of commodity A?

• A) 0.60
• B) 0.67
• C) 1.45
• D) 0.90

---

Definitions:

Growing Slowly

This term usually describes a process or phenomenon that is increasing or expanding at a reduced pace.

Static

Not changing or moving; often relates to static data in the context of legal technology.

ABA-Approved

Designation signifying that a product, service, or institution, such as a law school, meets the standards of the American Bar Association.

Paralegal Educational Program

A course of study designed to train individuals to assist professionals, particularly attorneys, in legal work.