Assume That You Manage an Equity Portfolio

question 33

Multiple Choice

Assume that you manage an equity portfolio. The portfolio beta is 1.15. You anticipate a decline in equity values and wish to hedge $500 million of the portfolio. Calculate the number of contracts you would need to hedge your position and indicate whether you would go short or long. Assume that the price of the S&P 500 futures contract is 1105 and the multiplier is 250.

• A) 2500 contracts short
• B) 1810 contracts short
• C) 1810 contracts long
• D) 2081 contracts short
• E) 2081 contracts long

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