Assume That You Manage a $2 Million Portfolio That Pays

question 37

Multiple Choice

Assume that you manage a $2 million portfolio that pays no dividends and has a beta of 1.3 and an alpha of 2% per month. Also, assume that the risk-free rate is 0.05% (per month) and the S&P 500 is at 1,500. If you expect the market to fall within the next 30 days, you can hedge your portfolio by ______ S&P 500 futures contracts (the futures contract has a multiplier of $250) .

• A) selling 1
• B) selling 7
• C) buying 1
• D) buying 7
• E) selling 11

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Definitions:

Plan Of Action

A detailed strategy or course of actions designed to achieve a specific goal or objective.

SOAP Format

A standardized method for documenting medical information, standing for Subjective, Objective, Assessment, Plan.

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A type of medical record keeping where information is organized according to the source that provided the information, such as lab reports, radiology, and physician notes, kept in separate sections.

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