Question 2. [Hedging and Speculation using Index Futures] This question is based on the following assumptions: Value of Portfolio P $1,000,000 Value of the assets (index) underlying one Index Futures A $1000 contract (= futures price * contract size) Beta of Portfolio B 2.5 Hint: This question provides useful examples to highlight different uses of derivatives, such as Hedging (see Question 2 Parts A and B), and Speculation (see Question 2 Part C). Question 2 - Part (A) What position and number of Index Futures contracts are needed to reduce the Beta of the portfolio from 2.5 to 0? In your answer, provide the position (long or short) and the number of contacts of Index Futures needed to perform this "market neutral" (hedging) strategy. Hint: review Class #3 presentation, sections 4.1, 4.2, 4.3, p. 11 to 13. Question 2 - Part (B) What position and number of Index Futures contracts are needed to reduce the Beta of the portfolio from 2.5 to 1.25? In your answer, provide the position (long or short) and the number of contacts of Index Futures needed to perform this hedging strategy. Hint: review Class #3 presentation, sections 4.1, 4.2, 4.3, p. 11 to 13. Question 2 - Part (C) What position and number Index Futures contracts are needed to increase the Beta of the portfolio from 2.5 to 5.5? In your answer, provide the position (long or short) and the number of contacts of Index Futures needed to perform this "market timing" (speculation) strategy