Problem 14.1a-14.2b Price Volume per Units Contract 50,000 cents per lbs 50,000 cents per lbs Cotton Dec Cotton Mar 17 62.7900 61.9100 Sell in millions by March 2017= Standard Deviation of Spot price = Standard Deviation of Future price = Correlation= 4,000,000 4.000% 3.500% 0.80x Optimum Ratio for 100% Optimized Optimized Ratio adjusted Total Contracts a Optimum number of contracts (rounded) Cotton Prices b $0.05 $0.67 Transaction on Delivery/Expiration Day Increase/Decrease in Spot Prices Scenarios - Spot Prices Cost from cotton sales + Profit/Loss form Forward Contract Net Payment for the European Goods $0.00 $0.62 -$0.10 $0.52 Problem 14.1a-14.2b Price Volume per Units Contract 50,000 cents per lbs 50,000 cents per lbs Cotton Dec Cotton Mar 17 62.7900 61.9100 Sell in millions by March 2017= Standard Deviation of Spot price = Standard Deviation of Future price = Correlation= 4,000,000 4.000% 3.500% 0.80x Optimum Ratio for 100% Optimized Optimized Ratio adjusted Total Contracts a Optimum number of contracts (rounded) Cotton Prices b $0.05 $0.67 Transaction on Delivery/Expiration Day Increase/Decrease in Spot Prices Scenarios - Spot Prices Cost from cotton sales + Profit/Loss form Forward Contract Net Payment for the European Goods $0.00 $0.62 -$0.10 $0.52