Assume That You Manage a $50 Million Equity Portfolio

question 142

Multiple Choice

Assume that you manage a $50 million equity portfolio. The portfolio beta is 0.85. You anticipate a cash inflow of $5 million into the portfolio. Calculate the number of contracts you would need to hedge your position and indicate whether you would go short or long. Assume that the price of the S&P 500 futures contract is 1062 and the multiplier is 250.

• A) 25 contracts short
• B) 18 contracts short
• C) 16 contracts long
• D) 19 contracts short
• E) 15 contracts short

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