You are planning to buy 100,000 bushels of soybeans in five months. Now you want to place a hedge on 100% of your cash position (a full hedge) with futures contracts. The size of the futures contract is 5,000 bu. a. How many futures contracts and what position do you need to place the hedge?

b. If the optimal hedge ratio is estimated as 0.85, or 85%, what is the optimal number of futures contracts you need to buy or sell?