Assume you are managing the portfolio of the following three stocks. Stock A B Shares 10,000...

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Assume you are managing the portfolio of the following three stocks. Stock A B Shares 10,000 25,000 Beta .75 1.20 Price $40 $10 C 10,000 1.50 $35 The risk free is 1.10%. The above stocks are mostly technology stock and do not pay any dividend in the foreseeable future. The most suitable hedging instrument is the NASDAQ 100 index. The index is currently at 12,540.00 points its expected return is 10%, including a 0.60% dividend yield. a. Price the 45 days to maturity NASDAQ 100 mini future contract ($20 multiple). b. Describe a hedge to the portfolio against market decline in the next month. c. One the fund co-managers suggest that a short market rally is expected early January. He suggests increasing the fund's beta to 1.70. How can you do that without trading any stocks? Assume you are managing the portfolio of the following three stocks. Stock A B Shares 10,000 25,000 Beta .75 1.20 Price $40 $10 C 10,000 1.50 $35 The risk free is 1.10%. The above stocks are mostly technology stock and do not pay any dividend in the foreseeable future. The most suitable hedging instrument is the NASDAQ 100 index. The index is currently at 12,540.00 points its expected return is 10%, including a 0.60% dividend yield. a. Price the 45 days to maturity NASDAQ 100 mini future contract ($20 multiple). b. Describe a hedge to the portfolio against market decline in the next month. c. One the fund co-managers suggest that a short market rally is expected early January. He suggests increasing the fund's beta to 1.70. How can you do that without trading any stocks?

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a To price the 45day maturity NASDAQ 100 mini future contract with a 20 multiple we need to calculate the futures price using the costofcarry model Th... View the full answer