What position in futures contracts on hedge the portfolio

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The Dow Jones is currently valued at $22,200 and the 1-year Mini Future contract has a price of $22,650. The risk free rate is 2.5% per annum and the Dow Jones dividend yield is 0.5% per annum. You are managing a portfolio that is worth $10 million and has a beta of 1.75.

a. What position in futures contracts on the S&P 500 is necessary to hedge the portfolio?

b. 6 months have passed and the Dow Jones is now valued at $22,375 and the future price is now $22,600. What is our portfolio value of your portfolio with the hedge from part a?

Reference no: EM131835361

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