The variance of six-monthly changes in the price of a commodity is 90.25, the variance of six-monthly changes in the futures price of the commodity is 110.25 and the coefficient of correlation between the two changes is 0.85. A company plans to buy 10,000 units of the commodity in 6 months, the size of the futures contract is on 1,000 units of the commodity and the delivery date of the contract is in 9 months. Consider the following statements. 1. The optimal hedge ratio if the futures contract that is used to hedge is 0.6958. II. The hedging effectiveness of the futures contract is 0.85. III. The company should hedge by buying 7.69 futures contracts. IV. If the company hedges optimally, the difference between the variance of the unhedged position and the variance of the optimally hedged position would be 65.21. Which of the following is correct? a. Statement I, II and III are incorrect, Statement IV is correct. O b. Statement I and II are incorrect, Statement III and IV are correct. C. Statement I is incorrect, Statement II, III and IV are correct. The variance of six-monthly changes in the price of a commodity is 90.25, the variance of six-monthly changes in the futures price of the commodity is 110.25 and the coefficient of correlation between the two changes is 0.85. A company plans to buy 10,000 units of the commodity in 6 months, the size of the futures contract is on 1,000 units of the commodity and the delivery date of the contract is in 9 months. Consider the following statements. 1. The optimal hedge ratio if the futures contract that is used to hedge is 0.6958. II. The hedging effectiveness of the futures contract is 0.85. III. The company should hedge by buying 7.69 futures contracts. IV. If the company hedges optimally, the difference between the variance of the unhedged position and the variance of the optimally hedged position would be 65.21. Which of the following is correct? a. Statement I, II and III are incorrect, Statement IV is correct. O b. Statement I and II are incorrect, Statement III and IV are correct. C. Statement I is incorrect, Statement II, III and IV are correct