An airline expects to SELL one million gallons of jet fuel in one month and decides to use heating oil futures for hedging. We suppose the correlation between jet fuel price and heating oil price is 0.93, the volatility of heating oil price is 0.03, the volatility of jet fuel oil price is 0.02. Each heating oil futures contract allows you to trade 42,000 gallons of heating oil. How many contracts should be used in hedging

14 contracts should be used in hedging.

Explanation:

The heating oil price is 0.93

The volatility of heating oil price is 0.03,

The volatility of jet fuel oil price is 0.02

Determining Minimum variance ratio

0.93×0.02/0.03 = 0.62

Each heating oil futures contract trade is 42,000 gallons of heating

ThereforeThe optimal number of contract is :

O.62×1,000,000/ 42,000 = 14.76

Converting 14.65 to nearest whole number will give us 14

answer; tech (a) is correct;

hi,

henry is an economist and wants to understand the relationship between inflation and consumer spending habits. for his research, he needs the consumer price index for 2014 and the inflation rate. based on the prices of goods given, what will he find to be the cpi and inflation rate for 2014? assume that a consumer’s basket for three consecutive years consists of the following:

you dont privide answer choices.

answer - 15% of a inflatation rate is 15% less in cpi