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damaskus [11]
3 years ago
13

A manager is holding a $1.3 million stock portfolio with a beta of 1.1. She would like to hedge the risk of the portfolio using

the S&P 500 stock index futures contract. How many dollars’ worth of the index should she sell in the futures market to minimize the volatility of her position?
Business
1 answer:
dusya [7]3 years ago
5 0

Answer:

The correct answer to the following question is $14,30,000.

Explanation:

Given information -

Portfolio contains $1.3 million of stocks

With beta of the portfolio being - 1.1

Here manager wants to hedge the risk of his portfolio by selling the index in the futures market by entering in to an futures contract which can be defined as a contract , where both buyer and seller agrees to buy or sell a particular product in the future at a predetermined price and quantity and quality, this is a standardized contract.

Amount that manager should sell in futures = $130,00,00 x 1.1

= $ 14,30, 000

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