Question: please do it 20 minutes will upvote 9. Answer both parts of this question. (a) 1,000,000 Use the following information: Portfolio value to be hedged:

please do it 20 minutes will upvote 9. Answer both parts

please do it 20 minutes will upvote

9. Answer both parts of this question. (a) 1,000,000 Use the following information: Portfolio value to be hedged: Current FTSE100 index: Portfolio beta: 3500 1.5 Expected index dividend yield: 4% Return on one-month Treasury Bill 3% Value of futures contract 10 per index point i. What is the actual cost-of-carry for the index? Explain your answer briefly. (4 marks) ii. Estimate the price for an index futures contract with delivery in 1 year. (5 marks) iii. How many contracts are needed to provide an optimal hedge for the equity portfolio

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