How many contracts should buy or sell

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Reference no: EM131928754

Question: Aero is a company that produces aerospace products, specifically its widget. Aero produces 500,000 widgets a year that use 2.5 ounces of gold per widget. The standard deviation of the price of a widget is 0.66, the standard deviation of gold is 0.44, and the correlation between widgets and gold is 0.92. If Aero wants to hedge its position using forwards it should buy or sell how many contracts, if each contract is for 100 ounces?

Reference no: EM131928754

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