Real Corn is $5.00 per bushel, and has a Stand. Dev = 0.15 ; Corn Futures have Stand. Dev = 0.20 ; and the correlation between the Real and the Futures is 0.90. One futures contract is for 5000 bushels.

(a) What is the optimal hedge ratio for corn use like Kellogg cereal ?

(b) If Kellogg expects to need 150,000 bushel of corn, exactly how many contracts should it hedge with AND say which one, Long or Short.