13. (Grapefrut hedge Faer D Jones has a erop o grapetruit that be ready fo...
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13. (Grapefrut hedge Faer D Jones has a erop o grapetruit that be ready fo harvest und sa?e as 150,000 nounds of grapefruit juice in 3 monts Jones is woied about possible price changes, so he is consideiing hedging There is no futures contract tor grapefruit juice, but there is a futurescontact for orange juice His som, Gavin, nevently studied minium- variance hedging and suggests it as a possible approach Currently the spoi pries are ? 20 per pound (or orange juice and $t 50 per pound for grapefruit juice The standud deviation ol the prices of orange juice and grapefruit juice is about 20% per year, and the correlation coefficienu between them is about 7 What is the ninimum-variance hedge for fariner Jones, and how effective is this hedge as compared lo no hedge
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