2. Assume a company is expecting a payment of 1,000,000 British pounds. The company wants to hedge their position with British pounds futures. The standard deviation of changes in prices of British pound and the futures prices are $0.003 and $0.008 respectively. Contract size is 62,500 British pounds and r = 0.85

a) Compute the hedge ratio.

b) How many contracts does the company need to buy or sell?