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

question 88

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.Assume that a month later the equity portfolio has a market value of $10,000,000 and the stock index future is priced at 1300 with a multiplier of 250.Calculate the profit (loss) on the stock index futures position.

• A) -$1,050,000
• B) -$550,000
• C) -$50,000
• D) $550,000
• E) $1,050,000

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Definitions:

Gastroenteritis

An inflammation of the stomach and intestines, typically resulting from bacterial toxins or viral infection and causing vomiting and diarrhea.

Numeric Rating Scale

A tool used for assessing the intensity of pain on a scale typically ranging from 0 to 10, where 0 means no pain and 10 means the worst possible pain.

Tylenol

A brand name for acetaminophen, an over-the-counter medication used to reduce pain and fever.

Prn Analgesic

Medication that is taken "as needed" for pain, where "prn" is a Latin abbreviation for "pro re nata," meaning when the situation arises.