Anglo American Platinum Limited is a major worldwide producer of platinum. Platinum is widely used in the production of catalytic converter. It is now August 1. The company is committed to selling 500 ounces of platinum on September 14. To hedge the risk, the company is considering using October futures contracts to offset the risk exposure. The standard deviation of monthly changes in the spot price of platinum per ounce is 30 and the standard deviation of monthly changes in the futures price of wheat per bushel the closest contract is 35. The correlation between the futures price changes and the spot price changes is .70. Each contract is for the delivery of 50 ounces platinum.

Please choose all correct answers. Please note that each incorrect answer will reduce the score by 10%.

	1.	The optimal hedge ratio is 50%.
	2.	The optimal hedge ratio is 55%.
	3.	The optimal hedge ratio is 60%.
	4.	The optimal hedge ratio is 65%.
	5.	The hedger should take a long futures position.
	6.	The hedger should take a short futures position.
	7.	The optimal number of futures contracts with the hedge is 4 contracts.
	8.	The optimal number of futures contracts with the hedge is 5 contracts.
	9.	The optimal number of futures contracts with the hedge is 6 contracts.
	10.	The optimal number of futures contracts with the hedge is 7 contracts.
	11.	The optimal number of futures contracts with the hedge is 8 contracts.