1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
nata0808 [166]
3 years ago
10

You manage a $10 million portfolio, all invested in equities; the beta for your portfolio is 0.70. You believe the market is on

the verge of a big but short-lived downturn; you would move your portfolio temporarily to T-bills, but you do not want to incur the transaction costs of liquidating and re-establishing your equity position. You decide to temporarily hedge your equity holdings with S&P 500 index futures contracts.
a) Should you be long or short the contracts?

b) How many contracts should you enter? (Assume the S&P index is at 1500 and the contract multiplier is $250.)
Business
1 answer:
andreev551 [17]3 years ago
6 0

Answer:

a. You should short the contract to hedge the portfolio.

b. You should enter 19 contracts.

Explanation:

a) According to the given becuase we own portfolio ( underlying), we need to sell future contracts in order to hedge.  So short the contract to hedge the portfolio.

b. To calculate how many contracts should you enter we would have to use the following formula:

number of contract required = (beta * portfolio value) / (beta of futures"Index value * multiplier)

Therefore, N = 0.7*10,000,000 / (1*1500*250) = 18.67 = 19 contracts

You should enter 19 contracts

You might be interested in
_____ are people willing to take the risk of starting, owning and operating a business. answer
Debora [2.8K]
<span>_____ are people willing to take the risk of starting, owning and operating a business. answer
a. entrepreneurs </span>
7 0
3 years ago
In top-down design, a step that needs to be expanded further is called a(n) ___.
Yuki888 [10]
A concrete step

Hope it helps!
8 0
3 years ago
Arrange the types of investments in the correct order from the least risky to the most risky investment.
sammy [17]
There are many types of investments. Some of them the given types of investment in the list.
A. Property are ownership investments. They are Real estate investments ( houses, apartment buildings, townhouses, and vacation houses. )
<span>They are the most volatile and profitable class of investment.
B. Bonds are lending investments. when </span>an investor effectively is loaning money to a company or agency (the issuer) in exchange for periodic interest payments plus the return of the bond’s face amount when the bond matures.
C. Staring a business - this is not an investment, but a whole process that needs investments to be realized.
D. Mutual funds are investment <span>funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets.</span>
The order from the least risky to the most risky investment is:
B. Bonds
D. Mutual funds
A. Property
C. Starting a business



8 0
4 years ago
Read 2 more answers
The only deposits of a rare and sought-after mineral known as ursarite are found in Russia. Since no other nation has deposits o
fomenos

Answer: Russia has an absolute advantage in the mineral.

Explanation:

Absolute advantage is an economics term that means to the ability of an individual, firm, or nation to manufacture a larger quantity of a product than its competitors. 

Adam Smith proposed absolute advantage of absolute advantage in international trade by using only labor as the input. Absolute advantage is derived by comparing labour productiveness between countries.

Russia has an absolute advantage because it's the nation that can produce the highest amount.

4 0
3 years ago
Jared, the operations head at Cerise Confectionery, showed gratitude to his employees by hosting an employee appreciation day. I
Art [367]

Answer:

Leading is the correct answer.

Explanation:

Leading is a process of influencing, directing and guiding a people of an organization to show them a direction.

Leading is the function that is carried out in the management process to motivate the employees to reach the organizational objectives.

Thus leading create a positive attitude among the people working in the organization.

4 0
3 years ago
Other questions:
  • Brothern Corporation bases its predetermined overhead rate on the estimated machine- hours for the upcoming year. Data for the m
    10·1 answer
  • Most SBA loan assistance is made by guaranteeing loans made by commercial banks.<br> True or False
    9·1 answer
  • The major activities of the Planning Section include:
    14·2 answers
  • Bill and Alma are shopping for their first home. They have found two houses that are nearly identical except for their locations
    15·1 answer
  • The information needed to make the journal entries to record the wages and salaries expense comes from
    15·2 answers
  • Fetzer Company declared a $0.35 per share cash dividend. The company has 200,000 shares authorized, 190,000 shares issued, and 8
    10·1 answer
  • Good Foods has net income of $82,490, total equity of $518,700, and total assets of $1,089,500. The dividend payout ratio is .30
    11·1 answer
  • You receive five annual cash flows of $10,000 with the first cash flow being received today and the last cash flow occurring 4 y
    9·1 answer
  • How does government pay for
    5·1 answer
  • Do you want to know what's happen in mexico? Here is the details:
    15·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!