Discussion Post: Managerial Decision Making
Section Case Study: Read "John Carter: Hedging" and analyze the following questions:
• Assume that the output quantity of John Carter's farm is known with certainty. Is it a good idea to hedge half the production? How much should Carter hedge? Note: There are 2000 pounds in a ton.
• Now assume that the output quantity is uncertain. How does the correlation between output and prices affect Carter's decision on how much to hedge? Prepare your analysis showing hedging decisions for correlations of -.99, 0, and .99.
• Assuming output quantity is uncertain, which correlation would you use to make a hedging decision? How much should Carter hedge assuming that correlation?
The response must include a reference list. Using Times New Roman 12 pnt font, double-space, one-inch margins, and APA style of writing and citations.