5. Assume that you manage a $2 million portfolio that pays no dividends and has a...
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5. Assume that you manage a $2 million portfolio that pays no dividends and has a beta of 1.25 and an alpha of 2% per month. Also, assume that the risk-free rate is 0.05% (per month) and the S&P 500 is at 1,300. If you expect the market to fall within the next 30 days, you can hedge S&P 500 futures contracts (the futures contract has a multiplier of your portfolio by $250). A. selling 1 B. selling 8 C. buying 1 D. buying 8 E. selling 6 5. Assume that you manage a $2 million portfolio that pays no dividends and has a beta of 1.25 and an alpha of 2% per month. Also, assume that the risk-free rate is 0.05% (per month) and the S&P 500 is at 1,300. If you expect the market to fall within the next 30 days, you can hedge S&P 500 futures contracts (the futures contract has a multiplier of your portfolio by $250). A. selling 1 B. selling 8 C. buying 1 D. buying 8 E. selling 6
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