Price changes of two gold-mining stocks have shown strong positive correlation. Their historical relationship is:

Average percentage change in A = 0.001 + 0.73(percentage change in B)

Changes in B explain 60% of the variation of the changes in A (R² = 0.6).

A) Suppose you own $112,000 of A. How much of B should you sell to minimize the risk of your net position?

Amount of B to sell: _______

B) What is the hedge ratio? (Round your answer to 2 decimal places.)

Here is the historical relationship between stock A and gold prices:

Average percentage change in A = 0.002 + 1.36(percentage change in gold price)

c-1. If R² = 0.48, can you lower the risk of your net position by hedging with gold (or gold futures) rather than with stock B?

Yes or no?

c-2. Will this provide as good of a hedge as the sale of stock B?

Yes or no?