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Suppose the S&P 500 currently has a level of 960. One contract of S&P 500 index...

Suppose the S&P 500 currently has a level of 960. One contract of S&P 500 index futures has a size of $250× S&P 500 index. You wish to hedge an $800,000-portfolio that has a beta of 1.2.

(A)In order to hedge the risk of your portfolio, should you long the futures or short the futures? Why?

(B)How many S&P 500 futures contracts should you trade to hedge your portfolio?

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