Suppose you are selecting a futures contract with which to hedge a portfolio. You have a choice of five contracts, each of which has the same variability, but with correlations of-0.94,-0.43, 0.15, 0.65, and 0.85. Of these alternatives, the contract with a correlation of would cause the bedged portfolio to have the lowest risk, while the contractwith a correlation ofwould leave the most risk remaining in the hedged portfolio.Selected Answer:Answers:60.85-0.940.15-0.94b. 0.85-0.94c-0.940.85d-0.94 0.15e 0.85 0.15

The correlation coefficient is an important measure to observe the relationship between two…

-0.94,-0.43, 0.15, 0.65, and 0.85. Of these alternatives, the contract with a correlation of with a correlation of Suppose you are selecting a futures contract with which to hedge a portfolio. You have a choice of five contracts, each of which has the same variability, but with correlations of would cause the hedged portfolio to have the lowest risk, while the contract would leave the most risk remaining in the hedged portfolio. Selected Answer: Answers: 60.85-0.94 a 0.15-0.94 0.85-0.94 -0.94 0.85 Gd-0.94 0.15 0.85 0.15

-0.94,-0.43, 0.15, 0.65, and 0.85. Of these alternatives, the contract with a correlation of with a correlation of Suppose you are selecting a futures contract with which to hedge a portfolio. You have a choice of five contracts, each of which has the same variability, but with correlations of would cause the hedged portfolio to have the lowest risk, while the contract would leave the most risk remaining in the hedged portfolio. Selected Answer: Answers: 60.85-0.94 a 0.15-0.94 0.85-0.94 -0.94 0.85 Gd-0.94 0.15 0.85 0.15

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 13QTD

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