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

question 79

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 $9,500,000 and the stock index future is priced at 1300 with a multiplier of 250. Calculate the profit on the equity position.

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

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