A Trader Has a Portfolio Worth $5 Million That Mirrors

question 10

Multiple Choice

A trader has a portfolio worth $5 million that mirrors the performance of a stock index.The stock index is currently 1,250.Futures contracts trade on the index with one contract being on 250 times the index.To remove market risk from the portfolio the trader should

• A) Buy 16 contracts
• B) Sell 16 contracts
• C) Buy 20 contracts
• D) Sell 20 contracts

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Definitions:

Unconditioned Stimulus

In classical conditioning, a stimulus that naturally and automatically triggers an unconditioned response without prior learning.

Conditioned Response

A learned reaction to a previously neutral stimulus that has been repeatedly presented along with an unconditioned stimulus.

Unconditioned Response

An automatic, innate reaction to a stimulus that does not depend on prior learning or conditioning.

Negative Punishment

A behavioral strategy involving the removal of a desirable stimulus following an undesirable behavior to decrease the likelihood of the behavior's recurrence.