A Company Has a $36 Million Portfolio with a Beta

question 5

Short Answer

A company has a $36 million portfolio with a beta of 1.2. The futures price for a contract on the S&P/ASX 200 Index is 4800. Futures contracts on $25 times the index can be traded. What trade is necessary to achieve the following? Indicate the number of contracts that should be traded and whether the position is long or short.)
i) Eliminate all systematic risk in the portfolio _ _ _ _ _ _ _ _ _ _
ii) Reduce the beta to 0.9 _ _ _ _ _ _ _ _ _ _
iii) Increase the beta to 1.8 _ _ _ _ _ _ _ _ _ _

---

Definitions:

Degrees of Freedom

The number of independent values in a statistical calculation that are free to vary.

Individuals

Distinct or separate entities often considered in the context of a study or statistical analysis.

Dependent Means

Refers to comparing the means of two related groups, often used in paired samples testing where subjects are measured twice.

Dependent-Samples T Test

A statistical test used when comparing the means of two related groups to determine if there are statistically significant differences.