USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 82

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 overall profit.

• A) $1,550,000
• B) -$2,000,000
• C) $2,050,000
• D) -$5,000,000
• E) $2,400,000

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Definitions:

Merchandise Inventory

The total value of a company's goods that are ready for sale at any given time, including both finished goods and goods in various stages of production.

Consigned Goods

Items that are sent by their manufacturer to a third party, but still remain the property of the manufacturer until sold.

Goods in Transit

Items that have been shipped by a seller but have not yet been received by the buyer.

Days' Sales in Inventory

A measure of how quickly inventory is sold and replaced over a period, calculated by dividing the ending inventory by the cost of goods sold and multiplying by 365.