Commercial firm have derivative position qualify as hedge

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Reference no: EM131056351

1. Why is it important for a commercial firm have a derivative position qualify as a hedge? Explain in detail.

2. You have a stock index portfolio with a beta of 1.0 and a market value of $10,000,000. If you sell $10,000,000 nominal value of S&P 500 futures contracts, what is the return of the combined stock and stock index futures contract? What have you done to the original $10,000,000 stock market position?

Reference no: EM131056351

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