It is february 16 a company has a portfolio of stocks worth, Ask an Expert

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It is February 16. A company has a portfolio of stocks worth $100 million. The beta of the portfolio is 1.3. The company would like to use the July futures contract on a stock index to change the beta of the portfolio to 0.5 during the period February 16 to June 16. The index futures price is 2,000, and each contract is on $250 times the index.

a. What position should the company take in the futures contract in order to construct the required adjustment?

b. Suppose that the company changes its mind and decides to decrease the beta of the portfolio from 1.3 to 1.0. What position in futures contracts should it take?

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Financial Management, Finance

Category:- Financial Management
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