Exhibit 21.11 Use the Information Below for the Following Problem(S)

question 37

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.Calculate the number of contract required to hedge the risk exposure and indicate whether the manager should be short or long.

• A) 100 contracts long.
• B) 44 contracts long.
• C) 44 contracts short.
• D) 100 contract short.
• E) None of the above.

---

Definitions:

Glycogen

An excess of glucose that is stored in the liver and in skeletal muscle.

Carbohydrates

Essential nutrients found in sugars, starches, and fibers that provide energy to the body’s cells, tissues, and organs.

Calorie

A unit used to measure the amount of energy food produces; the amount of energy needed to raise the temperature of 1 kg of water by 1°C.

Calories

Units of energy that measure the amount of energy food provides to the body.