Exhibit 21.11 Use the Information Below for the Following Problem(S)

question 37

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.Calculate the number of contract required to hedge the risk exposure and indicate whether the manager should be short or long.

• A) 100 contracts long.
• B) 44 contracts long.
• C) 44 contracts short.
• D) 100 contract short.
• E) None of the above.

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Definitions:

Design Approach

A design approach refers to the strategy or methodology applied during the problem-solving and planning phase of developing software, systems, or products, focusing on meeting specific goals and requirements.

Smaller Problems

A concept in programming and algorithm design that involves breaking a problem down into more manageable sub-problems.

Local Variables

Variables that are declared inside a function or block and are accessible only within that function or block.