How many stock futures contracts must you transact

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Reference no: EM132806868

Question - A $100 million portfolio consists of 35 million of stock with a beta of 1 and 65 million of bonds at a modified duration of 8. As a portfolio manager, you'd like to change the allocation to 50 million of stock and 50 million of bonds. In addition, you'd like to adjust the beta to 1.2 and the modified duration to 7.25. A stock index futures contract has a price of $225,000 and we can assume the beta is 1. A bond futures contract is priced at $92,000 with an implied modified duration of 5.9. In the aggregate how many stock futures contracts must you transact?

a. Sell 44 contracts

b. Buy 100 contracts

c. Buy 111 contracts

d. Sell 66 contracts

Reference no: EM132806868

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