A company has a $36 million portfolio with a beta of 1.2. The futures price for a contract on an index is 900. Futures contracts on $250 times the index can be traded. What trade is necessary to increase beta to 1.8?

Suppose you buy an asset at $50 and sell a futures contract at $53. Ignoring cost of carry, what is your profit at expiration if the asset price goes to $49?

Answer rating: 100% (QA)

To increase the beta from 12 to 18 the company needs to adjust its portfolio by taking a position in ... View the full answer