Suppose that the variance of quarterly changes in the spot prices of a commodity is 0.49,the standard deviation of quarterly changes in a futures price on the commodity is 0.64,and the coefficient of correlation between the two changes is 0.8.The optimal hedge ratio for the contract is:
A) 0.771
B) 0.363
C) 0.700
D) 0.875
E) None of these answers are correct.
Correct Answer:
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