USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 113

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider a portfolio manager with a $20,500,000 equity portfolio under management. The manager wishes to hedge against a decline in share values using stock index futures. Currently a stock index future is priced at 1250 and has a multiplier of 250. The portfolio beta is 1.25.
-Refer to Exhibit 15.10. Calculate the number of contract required to hedge the risk exposure and indicate whether the manager should be short or long.

• A) 100 contracts long
• B) 82 contracts short
• C) 82 contracts long
• D) 100 contracts short
• E) 50 contracts short

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