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You are given the following information about a portfolio you are to manage. For the long-term you are bullish, but you think the market may fall over the next month.

Portfolio Value: $1 million
Portfolio's Beta: 0.86
Current S&P500 Value 990
Anticipated S&P500 915

a. If the anticipated market value materializes, what will be your expected loss on the portfolio?
b. What is the dollar value of your expected loss?
c. For a 75-point drop in the S&P500, by how much does the index change?
d. How many contracts should you buy or sell to hedge your position? (fractions permitted)

 

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M929080

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