You are the manager of a stock portfolio. On October 1, your holdings consist of the eight stocks listed in the following table, which you intend to sell on December 31. You are concerned about a market decline over the next three months. The number of shares, their prices, and the betas are shown, as well as the prices on December 31.
| Stock |
Number of Share |
Beta |
10/1 Price |
31-Dec Price |
| R. R.Donnelley |
10,000 |
1 |
19.63 |
27.38 |
| B. F. Goodrich |
6,200 |
1.05 |
31.38 |
32.88 |
| Raytheon |
15,800 |
1.15 |
49.38 |
53.63 |
| Maytag |
8,900 |
0.9 |
55.38 |
77.88 |
| Kroger |
11,000 |
0.85 |
42.13 |
47.88 |
| Comdisco |
14,500 |
1.45 |
19.38 |
28.63 |
| Cessna |
9,900 |
1.2 |
29.75 |
30.13 |
| Foxboro |
4,500 |
0.95 |
24.75 |
26 |
On October 1, you decide to execute a hedge using a particular stock index futures contract, which has a $500 multiplier. The March contract price is 376.20. On December 31, the March contract price is 424.90. Determine the outcome of the hedge.