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linda_us
linda_us, Master's Degree
Category: Multiple Problems
Satisfied Customers: 1402
Experience:  A tutor for Business, Finance, Accounts and other related topics.
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The basis strengthens unexpectedly. Which of the following is true? A) A short hedger

Customer Question

The basis strengthens unexpectedly. Which of the following is true?
A) A short hedger's position improves.
B) A short hedger's position worsens.
C) A short hedger's position sometimes worsens and sometimes improves.
D) A short hedger's position stays the same.
Questions 2 through 5 are based on the following information: The standard deviation of monthly changes in the spot price of live cattle is (in cents per pound) 2. The standard deviation of monthly changes in the futures price of live cattle for the closest contract is 3. The correlation between the futures price changes and the spot price changes is 0.9. It is now September 27. A beef producer is committed to purchasing 200,000 pounds of live cattle on October 27. The producer wants to use the live cattle futures contracts to hedge its risk. Each contract is for the delivery of 40,000 pounds of cattle.
2.
The producer should enter a __________ position in the futures contract.
A) Long
B) Short
C) Cannot be determined
Submitted: 1 year ago.
Category: Multiple Problems
Expert:  adamousacom replied 1 year ago.
1 a.
Expert:  adamousacom replied 1 year ago.
I am opting out as there is an issue with the questions.
Expert:  Ellen replied 1 year ago.
Thank you so much for requesting my assistance. How many questions would you like assistance with and what is your deadline?

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