Exhibit 21.8 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 55

Multiple Choice

Exhibit 21.8
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider a portfolio manager with a $20,500,000 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 1250 and has a multiplier of 250. The portfolio beta is 1.25.
-Refer to Exhibit 21.8. Assume that a month later the equity portfolio has a market value of $20,000,000 and the stock index future is priced at 1150 with a multiplier of 250. Calculate the profit on the equity position.

• A)$100,000
• B)-$200,000
• C)$600,000
• D)-$500,000
• E)$400,000

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Definitions:

Timely Information

Information received or provided at an appropriate time to influence decision-making.

Decision Making

A process of selecting the best option from among various alternatives based on criteria and information.

Weaknesses

Refers to the limitations or deficiencies that can hinder an entity's ability to achieve its objectives.

Relevant Information

Data or facts that can influence decision-making processes, typically because it is current, accurate, and directly relates to the matter at hand.