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How many contracts should the company long or short

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Question - A company has a portfolio of stocks that is worth $200 million. The expected return for this portfolio is 14.7%. The S&P 500 index futures price is $1,050 and the multiplier is $250. Risk-free rate is 3% and market risk premium is 9%.

a) How many contracts should the company long or short for its current Beta?

b) The company would like to use April futures contract to change the beta of the portfolio to 1 between February 19 and March 19. How many contracts the company needs to be long or short to accomplish this change of Beta?

c) Assume the company wishes to increase the beta to 2. How many contracts should the company long or short?

Reference no: EM132850635

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