Suppose that the standard deviation of monthly changes in the price of commodity A is $2. The standard deviation of monthly changes in a futures price for a contract on commodity B (which is similar to commodity A) is $3. The correlation between the futures price and the commodity price is 0.9.

1. What hedge ratio should be used when hedging a one month exposure to the price of commodity A?

a. 1.22

b. 0.60

c. 0.93

d. 0.65

Aggart technologies is considering issuing new common stock and using the proceeds to reduce its outstanding debt. the stock issue would have no effect on total assets, the interest rate taggart pays, ebit, or the tax rate. which of the following is likely to occur if the company goes ahead with the stock issue? a. the roa will decline.b. taxable income will decline.c. the tax bill will increase.d. net income will decrease.e. the times-interest-earned ratio will decrease