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Price changes of two gold-mining stocks have shown strong positive correlation. Their historical relationship is: Average percentage change in A=0.001 +0.83(percentage change in B) Changes

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Price changes of two gold-mining stocks have shown strong positive correlation. Their historical relationship is: Average percentage change in A=0.001 +0.83(percentage change in B) Changes in B explain 60% of the variation of the changes in A (p = 0.6). a. Suppose you own $108.000 of A. How much of B should you sell to minimize the risk of your net position? Amount of B to sell b. What is the hedge ratio? (Round your answer to 2 decimal places.) Hedge ratio Here is the historical relationship between stock A and gold prices: Average percentage change in A=-0.002 + 1.32(percentage change in gold price) c-1. If R2 = 0.58, can you lower the risk of your net position by hedging with gold (or gold futures) rather than with stock B? Yes No c-2. Will this provide as good of a hedge as the sale of stock B? Suppose that in 2023 one- and two-year interest rates are 5,5% in the United States and 10% in Japan. The spot exchange rate is 120 24/5. Suppose that one year later interest rates are 3% in both countries, while the value of the yen hos appreciated to 114.89/$. a. Benjamin Pinkerton from New York invested in a U.S. two-year zero-coupon bond at the start of the period and sold it after one year, What was his return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Benjamin Pinkerton's return b. Madame Butterfly from Osaka bought some dollars. She also invested in the two-year U.S. zero-coupon bond and sold it after one year. What was her return in yen? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Butterfly's return in yen % c. Suppose that Ms. Butterfly had correctly forecasted the price at which she sold her bond and that she hedged her investment against currency risk. What would have been het return in yen? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Butterfly's return inyen %

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