You Own a Portfolio Which Is Valued at $6

question 86

Multiple Choice

You own a portfolio which is valued at $6.4 million and which has a beta of 1.27.You would like to create a riskless portfolio by hedging with S&P 500 futures contracts.The contract size is $250 times the index level.How many futures contracts are needed if the current S&P 500 index is 1406?

• A) short 16 contracts
• B) short 18 contracts
• C) short 23 contracts
• D) long 18 contracts
• E) long 23 contracts

Examine the concepts of substantial performance, tender, and specific performance.

Evaluate the application of the doctrine of commercial impracticability and frustration of purpose.

Comprehend termination of contracts by statute limitations, mutual agreement, or satisfaction of conditions.

Understand the concept of impossibility in contract law and differentiate between objective and subjective impossibility.

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Definitions:

Volatility

Refers to the degree of variation of a trading price series over time, commonly measured by the standard deviation of logarithmic returns, indicating the risk associated with a security or market.

Treasury Bills

Short-term government securities with maturity periods of one year or less, issued at a discount from their face value.

Optimal Weights

The best proportion of different assets in a portfolio to achieve maximum return for a given level of risk.

Expected Rate

The anticipated rate of return on an investment or asset, based on historical data or market forecasts.