Based on the Minimum Variance Hedge Ratio Approach What Is

question 32

Multiple Choice

Based on the minimum variance hedge ratio approach what is the hedging effectiveness,given the following information.The correlation coefficient between changes in the underlying instrument's price and changes in the futures contract price is 0.70,the standard deviation of the changes in the underlying position's value is 40%,and the standard deviation of the changes in the futures contract's price is 50%.(Select the closest answer. )

• A)50%
• B)45%
• C)40%
• D)35%
• E)30%

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Definitions:

Cost of Goods Sold

The direct costs attributable to the production of goods sold by a company, including materials and labor.

Cost of Goods Manufactured

The total cost incurred by a company to produce goods in a specific period, including materials, labor, and overhead costs.

Accounting Records

Documentation and books that capture all financial transactions of a business, company, or individual, providing a basis for financial statements and audits.

Cost of Goods Available

The total cost of inventory available for sale, calculated as the beginning inventory plus the cost of goods manufactured or purchased.