You Own a Portfolio Which Is Valued at $10 Million

question 53

Multiple Choice

You own a portfolio which is valued at $10 million and has a beta of 1.5. You would like to create a riskless portfolio by hedging using S&P 500 futures contracts. The contract size is $250 times the index level. How many futures contracts do you need to acquire if the current S&P 500 index is 1500?

• A)short 30 contracts
• B)short 40 contracts
• C)long 25 contracts
• D)long 30 contracts
• E)short 50 contracts

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Variations or shifts in the economic environment that can affect the performance and strategies of businesses.

Effective Income Tax Rate

The average percentage of their total income that individuals or corporations pay in taxes, reflecting the actual rate of taxation rather than the nominal tax rate.

Statutory Income Tax Rate

The prescribed rate by law that a company or individual pays on income, differing by country and sometimes by income level or source.

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The legal authority granted to a government entity to impose taxes on individuals, businesses, or transactions within a defined geographical area.