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 _ _ _ _ _ _ _ _ _ _

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Definitions:

Loading Docks

Loading docks are designated areas in warehouses, manufacturing plants, or retail centers where goods are loaded onto and offloaded from trucks, trailers, or other transport vehicles, facilitating the distribution of products.

Meatpacking Facility

A processing operation where animals are slaughtered for meat and prepared for distribution and sale.

OSHA

The Occupational Safety and Health Administration, an agency of the US Department of Labor tasked with ensuring safe and healthy working conditions by setting and enforcing standards.

Health and Safety

Measures and procedures implemented to ensure the well-being and physical protection of employees in the workplace.