A company has a 225000$ portfolio with a beta of 2. The S&P is currently 900....
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A company has a 225000$ portfolio with a beta of 2. The S&P is currently 900. One future contract is on 250 times the index. Risk-free rate is 10% per annum. 1) Suppose only four-month contracts are available, what is the current four-month future price? 2) What is the size of the position taken in the future contracts to minimize the Portfolio risk? 3) 4) What is the optimal number of contracts? Suppose that the CAPM model holds, assuming we will sell the portfolio in three months, when the index is expected to be 1000, what is the expected value of the hedger's position by the end of three months? A company has a 225000$ portfolio with a beta of 2. The S&P is currently 900. One future contract is on 250 times the index. Risk-free rate is 10% per annum. 1) Suppose only four-month contracts are available, what is the current four-month future price? 2) What is the size of the position taken in the future contracts to minimize the Portfolio risk? 3) 4) What is the optimal number of contracts? Suppose that the CAPM model holds, assuming we will sell the portfolio in three months, when the index is expected to be 1000, what is the expected value of the hedger's position by the end of three months?
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Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
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