An investor enters a short forward contract to sell 100 euros for dollars at exchange rate 1.3 dollars per euro. If the exchange rate at the end of contract is 1.29 dollars per euro, the dollar payoff is (a) −130 (b) − 1 (c) 0 (d) 1 (e) 130 And, The standard deviation of quarterly changes in oil price is 0.65, the standard deviation of quarterly changes in oil futures price is 0.81, and the correlation between the two changes is 0.8. The optimal hedge ratio for a 3-month futures contract is (a) 0.13 (b) 0.64 (c) 0.8 (d) 0.99 (e) 1.25

An investor enters a short forward contract to sell 100 euros for dollars at exchange rate 1.3 dollars per euro. If the exchange rate at the end of contract is 1.29 dollars per euro, the dollar payoff is (a) −130 (b) − 1 (c) 0 (d) 1 (e) 130 And, The standard deviation of quarterly changes in oil price is 0.65, the standard deviation of quarterly changes in oil futures price is 0.81, and the correlation between the two changes is 0.8. The optimal hedge ratio for a 3-month futures contract is (a) 0.13 (b) 0.64 (c) 0.8 (d) 0.99 (e) 1.25

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter27: Multinational Financial Management

Section: Chapter Questions

Problem 7MC

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