How many contracts should the pension fund

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1. You manage a stock portfolio worth $3,000,000 that has a beta of 1.25. In order to completely hedge the portfolio, you decide to trade S&P 500 futures contracts. Each contract is worth $250 per index point. How many contracts do you need to buy or sell if the S&P 500 index is currently at 1,500?

2. A pension fund wishes to reduce the beta of its portfolio from 1.2 to 0.5. The portfolio’s market value is $5 million and the quote for the futures price is 2200. The contract has a 250 multiplier. Rounded to the nearest whole number, how many contracts should the pension fund use and should they buy or sell the contracts?

Reference no: EM132061276

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