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A pension fund manager wishes to reduce the beta of the pension portfolio’s smallcap component from 0.90 to 0.80 for a period of 6 months. The small-cap portfolio has a market value of $485,000,000. The pension fund manager plans to use a futures contract priced at $249,000 (this includes the multiplier) in order to adjust the portfolio beta. The futures contract has a beta of 0.93. Calculate the number of futures contracts that should be bought or sold to achieve a change in the portfolio beta.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M93056547

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