Exhibit 21.11 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 93

Multiple Choice

Exhibit 21.11
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider a portfolio manager with a $10,000,000 equity portfolio under management. The manager wishes to hedge against a decline in share values using stock index futures. Currently a stock index future is priced at 1350 and has a multiplier of 250. The portfolio beta is 1.50.
-Refer to Exhibit 21.11. Assume that a month later the equity portfolio has a market value of $10,000,000 and the stock index future is priced at 1300 with a multiplier of 250. Calculate the profit (loss) on the stock index futures position.

• A)-$1,050,000
• B)-$550,000
• C)-$50,000
• D)$550,000
• E)$1,050,000