What is the profit or loss on the stock portfolio

Assignment Help Financial Management

Reference no: EM131613654

You are the manager of a stock portfolio worth $8,750,500 and a beta of 1.05. During the next 5 months, you expect a correction in the market that will take the market down about 8%. Your portfolio is expected to fall 8.4% (1.05*8%). So, you want to lower your beta to 1. A stock index futures contract with the appropriate expiration is priced at 420.25 with a $500 multiplier.

a. If the stock portfolio manager is concerned about a market correction of 8%, should the manager buy or sell a stock index futures contact?

b. At initiation, how much is one futures contract worth?

c. How many futures contracts should the manager buy or sell (round up)?

In 3 months, the portfolio value has fallen to $8,170,000 and the futures price is 401.15.

d. How much is one futures contract worth?

e. What is the profit or loss on the stock portfolio (must state if gain or loss and the amount)?

f. What is the profit or loss on the futures contract (must state if gain or loss and the amount)?

g. What is the net gain or loss on the combined stock portfolio and the futures contracts (must state if gain or loss and the amount)?

Reference no: EM131613654

Questions Cloud

Calculate return on equity under each of the three economic : Calculate return on equity (ROE) under each of the three economic scenarios before any debt is issued.

Calculate the total payment and interest payment : Calculate the total payment, interest payment, and remaining face value on the 1st of January of every year between 2018 and 2024 for this bond.

Calculate call option value-two state stock price model : Calculate the call option's value using the two-state stock price model.

Calculate also the total payment and interest payment : Calculate also the total payment, interest payment, and remaining face value on the 1st of January of every year between 2018,

What is the profit or loss on the stock portfolio : At initiation, how much is one futures contract worth? What is the profit or loss on the stock portfolio (must state if gain or loss and the amount)?

What is the portfolio worth at the time of decision : What is the portfolio worth at the time of decision? What is the value of the portfolio on August 28? how much is the gain or loss on all the contracts combined

Earned value management : technical team member in using Earned Value Management.

Concerned about an increase in interest rates : If the bond manager is concerned about an increase in interest rates, should the manager buy or sell a T- bond futures contact?

Analyst concerned about market increase or decrease : Is the analyst concerned about a market increase or decrease? How much is one futures contract worth?

User Account

All Pages