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A Company Has a $36 Million Portfolio with a Beta

question 9

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A company has a $36 million portfolio with a beta of 1.2.The futures price for a contract on an index is 900.Futures contracts on $250 times the index can be traded.What trade is necessary to reduce beta to 0.9?


Definitions:

Exchange Gains

A financial outcome resulting from favorable changes in exchange rates, leading to increased value of foreign currency transactions or holdings prior to their conversion to a home currency.

Exchange Rate

The amount one currency is valued at when converting to a different one.

Interest

The charge for the privilege of borrowing money, typically expressed as an annual percentage rate.

Loan

A financial arrangement where one party lends an asset, usually money, to another party under the condition of eventual repayment of the principal amount along with interest or charges.

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