$\frac{13}{?}$

A company has a $$36$ million portfolio with a beta of $1\mathrm{.}2.$ The futures price for a contract on the S&P index is $900.$ Futures contracts on $$250$ times the index can be traded. What trade is necessary to increase beta to $1\mathrm{.}8.($Indicate the number of contracts that should be traded and whether the position is long or short.$)$

A$.$ Long position, $96$ futures contracts.

B$.$ Short position, $192$ futures contracts.

C$.$ Short position, $48$ futures contracts.

D$.$ Long position, $192$ futures contracts.

Answer: Solution: ${?}_{(})$

$14/$

The three$-$year zero rate is $7\%$ and the four$-$year zero rate is $7\mathrm{.}5\%($both continuously compounded. What is the forward rate for the fourth year with continuous compounding?

A$.7\mathrm{.}25\%$

B$.7\mathrm{.}50\%$

C$.8\mathrm{.}50\%$

D$.9\mathrm{.}00\%$

Answer: Solution:

$\frac{15}{?}$

A short forward contract that was negotiated some time ago will expire in three months and has a delivery price of $$40.$ The current forward price for three$-$month forward contract is $$42.$ The three$-$month risk$-$free interest rate $($with continuous compounding$)$ is $8\%.$ What to the nearest cent is the value of the short forward contract?

A$.-$$$1\mathrm{.}96$

B$.-$$$2\mathrm{.}20$

C$.$ $$1\mathrm{.}96$

D$.$ $$2\mathrm{.}5$

$5$