1. The S&P 500 is currently valued at $2,700 and the 1-year Mini Future contract has a price of $2,767. The risk-free rate is 2.5% per annum and the S&P 500 dividend yield is 0.5% per annum. You are managing a portfolio that is worth $10 million and has a beta of 1.75. (Remember E-mini S&P 500 Future contracts are 50 x price) What position in futures contracts on the S&P 500 is necessary to hedge the portfolio so our portfolio beta is now 1?

1. Short 54 E-mini S&P 500 future contracts
2. Short 126 E-mini S&P 500 future contracts
3. Short 2,711 E-mini S&P 500 future contracts
4. Long 126 E-mini S&P 500 future contracts
5. Long 2,711 E-mini S&P 500 future contracts

2. Suppose that the quoted Treasury bond futures price is 91-080. Which of the following five bonds is the cheapest to deliver bond?

Bond	Quoted Bond Spot Price	Accrued Interest	Conversion Factor
1	106-050	$1.25	1.1155
2	113-155	$0.00	1.2223
3	98-317	$5.55	1.0606
4	122-120	$3.00	1.3221
5	91-192	$2.22	0.9715

1. Bond 1
2. Bond 2
3. Bond 3
4. Bond 4
5. Bond 5