Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

Chococo Inc., a producer of powdered hot chocolate, has just received a large order that will require the purchase of 750 metric tons of cocoa in 3 months. The current spot price of cocoa is $2,645 per metric ton. The standard deviation of the value for the inventory is 0.15. Mr. Dulce, the CFO of the Chococo, is considering a minimum-variance hedge of this future cocoa purchase using the three-month cocoa futures contract. The contract size is 10 metric tons. The volatility of the futures is 0.2. The covariance between the change in the spot and futures cocoa price is 0.027.

a. What is the estimated effectiveness of this minimum variance hedge?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M942498

Have any Question? 


Related Questions in Basic Finance

Ai enterprises is a computer corporation and its present

AI Enterprises is a computer corporation and its present sources of funds are $20,000,000 in equity capital and $8,000,000 in preferred stock. The company wants to fund some of its future projects (estimated cost: $12,00 ...

Due to recent bad press a major healthcare company has

Due to recent bad press, a major healthcare company has experienced a market reevaluation. The firm has a $1,000 bond issue outstanding with 15 years to maturity and a coupon rate of 8%, with interest paid semiannually. ...

Information for next four questions the nullcom inc is

Information for next four questions: The Nullcom Inc. is considering to purchase a new machine. The cost of the machine is $200,000 and installation of $10,000. The machine will be depreciated straight-line to zero. The ...

Analyze a sales letter or email you receivebe on the

Analyze a sales letter or email you receive. Be on the lookout for sales letters you receive at home or through email. Bring one to class so you can discuss the example with other students. In small groups, discuss how t ...

Q1 what is the market value of the following bondcoupon

Q1. What is the market value of the following bond? Coupon 8% Maturity date 2038 Interest paid semiannually Par Value $1000 Market interest rate 10% Q2. What is the market value of the following bond? Coupon 9% Maturity ...

Some machines require two registers for certain

Some machines require two registers for certain single-precision values. Suppose that the result of a multiplication of single-register quantities requires two consecutive registers, and when we divide a=b, the value of ...

Individual paper - analysis of an ethical dilemmathe

Individual Paper - Analysis of an Ethical Dilemma The assignment is as follows: Each student should research and write a paper about an organization that has encountered a serious ethical dilemma in the past. Please do n ...

1 how influential are corporate and personal taxes on

1. How influential are corporate and personal taxes on capital structure? Historically, have changes in American tax rates greatly affected debt ratios? 2. How do stock prices generally react to announcements of firms' c ...

A city built a new parking garage in a business district

A city built a new parking garage in a business district. For a random sample of 100 days, daily fees collected averaged $1,800, with a standard deviation of $500. Construct a 90% confidence interval estimate of the mean ...

1 depreciation expense is located on thea balance sheetb

1. Depreciation expense is located on the A. balance sheet. B. income statement. C. the accounts receivable documention. D. the accounts payable documentation. 2. Joe Sullivan invests $9,000 at the end of each year for 2 ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen