Suppose You Wish to Hedge a Stock Portfolio with an Index

question 95

Multiple Choice

Suppose you wish to hedge a stock portfolio with an index futures contract. An increase in the quoted futures price of the index will _________ the number of futures needed for the hedge.

• A) increase
• B) decrease
• C) Not change
• D) increase only if the beta of the portfolio is greater than one
• E) decrease only if the beta of the portfolio is greater than one

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Definitions:

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