7. A manufacturer plans to purchase 600,000 pounds of copper wire six months from now, and would like to hedge this plan

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7 A Manufacturer Plans To Purchase 600 000 Pounds Of Copper Wire Six Months From Now And Would Like To Hedge This Plan 1 (137.19 KiB) Viewed 53 times

7. A manufacturer plans to purchase 600,000 pounds of copper wire six months from now, and would like to hedge this planned purchase using copper futures. The correlation between copper futures prices and copper wire prices is 0.85. The standard deviation of copper futures prices is 0.20 and the standard deviation of copper wire prices is 0.25. Each copper futures contract is for 10,000 pounds. What position should the manufacturer take in copper futures contracts to hedge its planned purchase of copper wire?