Suppose that Jewelry Company is planning to sell 20,000 ounces of platinum at some future date. The standard deviation of changes in the futures price per ounce is 12.86, and the standard deviation of changes in the spot price per ounce is 14.38, and the correlation coefficient between the spot and futures price change is 0.8. Each future contract deliver 50 ounces.

Part I.

Compute the optimal hedge ratio for Jewelry Co.

Part II.

How many contracts do they need to hedge their position?

Part III.

Will this be a long hedge or a short hedge?