Questions from Business Statistics

Q: A company knows that it is due to receive a certain amount

A company knows that it is due to receive a certain amount of a foreign currency in 4 months. What type of option contract is appropriate for hedging?

Q: On July 1, an investor holds 50,000 shares of

On July 1, an investor holds 50,000 shares of a certain stock. The market price is $30 per share. The investor is interested in hedging against movements in the market over the next month and decides...

Q: ‘‘When the futures price of an asset is less than the

‘‘When the futures price of an asset is less than the spot price, long hedges are likely to be particularly attractive.’’ Explain this statement.

Q: The CME Group offers a futures contract on long-term Treasury

The CME Group offers a futures contract on long-term Treasury bonds. Characterize the traders likely to use this contract.

Q: ‘‘Options and futures are zero-sum games.’’ What

‘‘Options and futures are zero-sum games.’’ What do you think is meant by this?

Q: The standard deviation of monthly changes in the spot price of live

The standard deviation of monthly changes in the spot price of live cattle is (in cents per pound) 1.2. The standard deviation of monthly changes in the futures price of live cattle for the closest co...

Q: Suppose that, on October 24, 2018, a company sells

Suppose that, on October 24, 2018, a company sells one April 2019 live cattle futures contract. It closes out its position on January 21, 2019. The futures price (per pound) is 121.20 cents when it en...

Q: The expected return on the S&P 500 is 12%

The expected return on the S&P 500 is 12% and the risk-free rate is 5%. What is the expected return on an investment with a beta of (a) 0.2, (b) 0.5, and (c) 1.4?

Q: In the corn futures contract traded on an exchange, the following

In the corn futures contract traded on an exchange, the following delivery months are available: March, May, July, September, and December. Which of the available contracts should be used for hedging...

Q: Does a perfect hedge always succeed in locking in the current spot

Does a perfect hedge always succeed in locking in the current spot price of an asset for a future transaction? Explain your answer.