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Ksju [112]
2 years ago
6

A company has a $20 million portfolio with a beta of 1.2. It would like to use futures contracts on a stock index to hedge its r

isk. The index futures price is currently standing at 1080, and each contract is for delivery of $250 times the index. What is the hedge that minimizes risk
Business
1 answer:
11111nata11111 [884]2 years ago
7 0

Answer: 88.89 or 89

Explanation: Futures contract refers to a legal binding which obligates a buyer and seller to transact about a commodity, good, security or services at a predetermined price but goods are delivered or paid for in the future.

Given the following ;

Portfolio value(p) = $20million

Portfolio Beta (b) = 1.2

Index price (i) = 1080

Multiplier = 250

Future value(A) = index price × multiplier

Future value(A) = 1080 × 250 = 270000

Number of contracts (N) = (portfolio value × portfolio Beta) ÷ future value

N = ($20,000,000×1.2)÷270000

N = 24000000 ÷×270000

N = 88.8888=88.89

N = 89 (NEAREST whole number)

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Answer:

True

Explanation:

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If, Actual Overheads > Applied overheads, we say overheads are underapplied. this means the cost of goods sold has been charged too little and must be increased.

and

If, Applied Overheads > Actual overheads, we say overheads are overapplied. this means the cost of goods sold has been charged too much and must be lowered.

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grin007 [14]

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3 0
2 years ago
The labor force equals the number of people A) employed. B) unemployed. C) employed plus unemployed. D) in the working-age popul
GREYUIT [131]

Answer:

The answer is C.

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5 0
3 years ago
Accounting 5.) In the chart of accounts, the balance sheet accounts are normally listed in which order?
Liula [17]

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6 0
2 years ago
On January 1, 2021, Black Inc. issued stock options for 200,000 shares to a division manager. The options have an estimated fair
Gennadij [26K]

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The correct answer is $400,000 (increase).

Explanation:

According to the scenario, computation of the given data are as follows:

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2 years ago
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