You Own a Portfolio Which Is Valued at $12

question 17

Multiple Choice

You own a portfolio which is valued at $12.5 million and which has a beta of 1.42.You would like to create a riskless portfolio by hedging using S&P 500 futures contracts.The contract size is $250 times the index level.How many futures contracts do you need to acquire if the current S&P 500 index is 1420?

• A)short 68 contracts
• B)short 50 contracts
• C)long 41 contracts
• D)long 57 contracts
• E)short 63 contracts

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Definitions:

American Federation of Teachers

The American Federation of Teachers is a labor union in the United States that represents teachers and other educational staff, advocating for their rights and working conditions.

International Brotherhood of Teamsters

A labor union in the United States and Canada that represents a diverse membership of blue-collar and professional workers in various industries.

Samuel Gompers

A labor union leader who founded the American Federation of Labor (AFL) and was pivotal in advocating for workers' rights and labor reforms in the United States.

AFL

Short for American Federation of Labor, it is a national federation of labor unions in the United States, founded in 1886.