Exhibit 21.9 Use the Information Below for the Following Problem(S)

question 85

Multiple Choice

Exhibit 21.9
Use the Information Below for the Following Problem(S)
As a portfolio manager, you are responsible for a $150 million portfolio, 90 percent of which is invested in equities, with a portfolio beta of 1.25. You are utilizing the S&P 500 as your passive benchmark. Currently the S&P 500 is valued at 1202. The value of the S&P 500 futures contract is equal to $250 times the value of the index. The beta of the futures contract is 1.0.
-Refer to Exhibit 21.9.How many contracts should you buy or sell in order to increase the portfolio beta to 1.30 (rounded to the nearest integer) ?

• A) Sell 70 contracts
• B) Buy 70 contracts
• C) Buy 87 contracts
• D) Buy 98 contracts
• E) None of the above

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