Question

An equity fund manager has a portfolio of stocks worth USD 170 million. The beta of the portfolio is 1.0. In early July, the fund manager would like to use September futures contract on the S&P 500 to change the beta of the portfolio to 2.0. The index futures price is 1,000 and each contract is on USD 250 times the index.

Which of the following statements is most accurate?

Group of answer choices

The fund manager needs to long 300 index futures contracts.

The fund manager needs to long 120 index futures contracts.

The increase of portfolio beta will increase market risk exposure.

The fund manager needs to short 680 index futures contracts.

On April 10, crude oil's spot price was $33 and its August futures price was $35. On July 1 the spot price is $64 and the August futures price is $61.50. An oil company entered into futures contracts on April 10 to hedge its oil selling transaction on July 1. It closed out its position on July 1.

Which of the following statements is least accurate?

Group of answer choices

The effective price (after taking account of hedging) received by the company is $26.5.

The effective price (after taking account of hedging) paid by the company is $61.50.

The company has loss on its futures position.

The company entered a long hedge.

The current spot price of silver is USD 15 per ounce. The storage costs are USD 0.24 per ounce per year payable quarterly in advance. Assuming that risk-free interest rate is 10% per annum (continuous compounded), what is the per ounce futures price of silver in USD for the delivery in nine months.

Group of answer choices

16.42

15.42

16.36

15.36

Answer #1

A fund manager has a portfolio worth $100 million with a beta of
0.88. the manager is concerned about the performance of the market
over the next 2 months and plans to use 3-month futurescontracts on
the S&P 500 to hedge the risk. The current level of the index
is 2600, one contract is on 250 times the index, the risk free rate
is 3% per annum, and the dividend yield on the index is 2% per
annum.
(a) Calculate...

A fund manager has a portfolio worth $50 million with a beta of
0.87. The manager is concerned about the performance of the market
over the next two months and plans to use three-month futures
contracts on the S&P 500 to hedge the risk. The current level
of the index is 1250, one contract is on 250 times the index. The
current 3-month futures price is 1259.
1) What position should the fund manager take to eliminate all
exposure to...

A equity fund manager has a portfolio worth $100 million with a
beta of 1.27. The current level of S&P 500 index is 2,650. The
price of one- month S&P 500 futures contract is 2,680. One
contract is on $250 times the index points. What
position should the fund manager take if she/he wants to change the
portfolio to be a double- leveraged index ETF over the next
month?

It is February 16. A company has a portfolio of stocks worth
$100 million. The beta of the portfolio is 1.3. The company would
like to use the July futures contract on a stock index to change
the beta of the portfolio to 0.5 during the period February 16 to
June 16. The index futures price is 2,000, and each contract is on
$250 times the index.
a. What position should the company take in the futures contract
in order...

It is July 16. A company has a portfolio of stocks worth £30
million. The beta of the portfolio is 1.0. The company would like
to use the December futures contract on a stock index to change
beta of the portfolio to zero during the period July 16 to November
16. The index is currently 1,250, and each contract is on £250
times the index.
(a) What position should the company take? [6 marks]
(b) If the company instead wants...

In early March an insurance company portfolio manager has a
stock portfolio of $500 million with a portfolio beta of 1.20. The
portfolio manager plans on selling the stocks in the portfolio in
June to be able to pay out funds to policyholders for annuities,
and is worried about a fall in the stock market. In April, the CME
Group S&P 500 mini= Futures contract index is 2545 for a June
futures contract ($50 multiplier for this
contract).
a. What...

Ch 24: An investor's portfolio with a beta of 1.25 is worth $1
million. The current S&P500 price is $1500. The current price
on the S&P500 futures (each contract is on $250 times the
index) is $1800. How many futures contracts will the investor need
and what position will he/she take to completely hedge away the
market's impact on the portfolio?
Short 3 shares of the S&P500 index
Long 3 S&P500 futures contracts
Short 3 S&P500 futures contracts
Long 3...

For each question use the following data: A fund manager has a
portfolio worth $50 million with a beta of 0.80. The manager is
concerned about the performance of the market over the next three
months and plans to use three-month put options with a strike price
of 1950 on a well-diversified index to hedge its risk. The current
level of the index is 2,000, one contract is on 100 times the
index, the risk-free rate is 4% per annum,...

If the portfolio manager manages $100 million of equity with a
beta of 1.2 and wishes to create a net short position with a beta
of -2.0, and the equity futures contract size is (250 (multiplier)
X 3,048 (current S & P 500 index)) = 762,000, the futures beta
is 1.03, how many contracts must be transacted? Long or short?

Suppose that a portfolio is worth $600 million. The beta of the
portfolio is 1.5. The portfolio manager would like to use the CME
December futures contract on the S&P 500 to change the beta of
the portfolio to 0.5. The index is currently 2,400, and each
contract is $250 times the index.
1. What is the future position required to reach this goal?
2.Long or short?
3.How many contracts?

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