What position is needed to hedge the portfolio

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Question - S&P 500 index is currently priced at 1,000. A futures contract on the S&P 500 index is currently priced at 1,010. Each futures contract is on $250 times the index price. The dividend yield on the index is 0.25% per year. The risk free rate is 1% per year. The value of a portfolio is currently worth $5,050,000 and the beta of this portfolio is 1.5. The portfolio manager wants to hedge this portfolio for 1 year using the above futures contract on the S&P500 index. What position is needed to hedge the portfolio?

a. Short 30 contracts

b. Short 50 contracts

c. Long 30 contracts

d. Long 50 contracts

Reference no: EM132997692

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