Futures contracts on well-diversified stock index

Assignment Help Financial Management
Reference no: EM131875997

A company has a $20 million portfolio with a beta of 1.2. It would like to use futures contracts on a well-diversified stock index to hedge its risk. The index futures price is currently 1080, and each contract is for delivery of $250 times the index. What is the hedge that minimizes risk? What should the company do if it wants to reduce the beta of the portfolio to 0.6?

Reference no: EM131875997

Questions Cloud

How would you act in your chosen management style : Consider the following scenario and apply your management style to it. How would you act in your chosen management style? You are the director of Tri-County.
What will be the company net income for the current year : What will be the company's net income for the current year if there is a 10 percent increase in projected unit sales volume
Connection between the organization mission and objectives : The connection between the organization's mission, objectives, policies, and the implementation and revision of their respective compensation and benefit system
How does the work breakdown structure help to minimize risks : How does the Work Breakdown Structure (WBS) help to minimize risks? How often should a risk analysis be conducted? Why are risks often overlooked?
Futures contracts on well-diversified stock index : A company has a $20 million portfolio with a beta of 1.2. It would like to use futures contracts on a well-diversified stock index to hedge its risk.
Write a detailed observation of that activity : People engage in observation every day. In Anthropology we try to engage in systematic observation.
Explain the relationship between wbs and network diagrams : Explain the relationship between work breakdown structures (WBS), network diagrams, and risk management.
According to the trade-off theory : According to the trade-off theory, how is the capital structure determined? Firms have an incentive to add leverage to the capital structure.
Cash flows will occur in erewhon and are expressed in dollar : All cash flows will occur in Erewhon and are expressed in dollars. In an attempt to improve its economy,

Reviews

Write a Review

Financial Management Questions & Answers

  Foreign company acquisition

Acquisition by a foreign company and the effects of that decision and the results of foreign exchange in Euro and the exchange rate differences.

  Financial management for profit and non profit organizations

In this essay, we are going to discuss the issues of financial management in a non-profit organisation.

  Method for estimating a venture''s value

Evaluate venture's present value, cash and surplus cash and basic venture capital.

  Replacement analysis

This document show the Replacement Analysis of modling machine. Is replacement give profit to company or not?

  Business finance task - capital budgeting

Your company is considering using the payback period for capital-budgeting. Discuss the advantages and disadvantages of this technique.

  Analysis of the investment

In this project, you will focus on one of these: the additional cost resulting from the purchase of an apple press (a piece of equipment required to manufacture apple juice).

  Conduct a what-if analysis

Review the readings and media for this unit, including the Anthony's Orchard case study media. Familiarise yourself with the Anthony's Orchard company and its current situation.

  Determine operational expenditures

Organisations' behaviour is guided by financial data. In the short term, such data will help determine operational expenditures; in the long term, historical data may help generate forecasts aimed at determining strategic plans. In both instances.

  Personal financial management

How much will you have left over each half year if you adopt the latter course of action?

  Sources of finance for expansion into new foreign markets

A quoted company is considering several long-term sources of finance for expansion into new foreign markets.

  Long term financial planning

This assignment is designed for analyze Long term financial planning begins with the sales forecast and the key input in the long term fincial planning.

  Explain the role of fincial manager

This assignment explain the role of fincial manager, function of manger. And what are the motives of financial manager.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd