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NEW QUESTION: 1
Which configuration command can you apply to a router so that its local interface becomes active if all other routers in the group fail?
A. No additional configuration is required
B. Router(config)#standby 1 track Ethernet
C. Router(config)#standby 1 preempt
D. Router(config)#standby 1 Priority 250
Answer: C

NEW QUESTION: 2
Which of the following sub-processes of Capacity Management is concerned with the management of the individual components of the IT Infrastructure?
A. Resource Capacity Management
B. Service Capacity Management
C. Capacity Management Reporting
D. Business Capacity Management
Answer: A

NEW QUESTION: 3
A corn farmer has committed to sell 20,000 bushels of corn in November. The spot price has a standard deviation of 20 cents per bushel, and its correlation with the December futures prices is 0.9. The futures contract is for 5000 bushels and has a standard deviation of 24 cents per bushel. What should the corn producer do if he/she wishes to hedge the risk of price movements between now and November?
A. Sell 3 December corn futures contracts, and close these out in November when he/she sells the corn
B. Sell 4 December corn futures contracts, and close these out in November when he/she sells the corn
C. Buy 3 December corn futures contracts, and close these out in November when he/she sells the corn
D. Buy 4 December corn futures contracts, and close these out in November when he/she sells the corn
Answer: A
Explanation:
Explanation
We calculate the minimum variance hedge ratio as 0.9*20/24 = 0.75; and multiply this by the ratio of the
[units required to be hedged] to the [units per futures contract], ie 0.75*20000/5000 = 3. Therefore the right quantity of contracts to sell is 3 contracts. Since the corn farmer has an obligation to sell in November, he or she can sell the futures now and lock a price in. The price locked in will be equal to the futures price, plus the basis (ie the difference between the spot and the futures price) in November.
Therefore the correct answer is to sell 3 December corn futures contracts and close these out prior to delivery in November when the November spot price will be realized. If prices have fallen, the loss on the spot trade will be made up by the profit on the hedge in the form of the futures, and also the other way round.