You Are Given the Following Information About a Portfolio You

question 24

Multiple Choice

You are given the following information about a portfolio you are to manage. For the long term, you are bullish, but you think the market may fall over the next month. $$\begin{array} { l r r } \text { Portfolio Value } & \$ \quad 1 \text { million } \\\text { Portfolio's Beta } & 0.86 \\\text { Current S\&P500 Value } & 990 \\\text { Anticipated S\&P500 Value } & 915 \\\end{array}$$ How many contracts should you buy or sell to hedge your position? Allow fractions of contracts in your answer.

• A) Sell 3.477
• B) Buy 3.477
• C) Sell 4.236
• D) Buy 4.236
• E) Sell 11.235

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Definitions:

Exchange Rate

The worth of a currency when converting it into another currency.

Future

The time or period that comes after the present, often considered in terms of expectations, plans, or predictions.

Renminbi

The official currency of the People's Republic of China, also known as the yuan in its unit designation.

FX Swaps

A financial agreement where two parties exchange currencies at a specified rate for a certain period, often used to hedge currency risks.