1.Ms. Smith bought 500 shares of common stock of ABC Ltd. At $100 a share a few years ago. Currently, price per share of ABC's stock is $120. Suppose she takes a short position of 400 shares at the current price of $120. For the following possible spot price St on a future time t, calculate capital gain (loss) from her total position in ABC's stock:

i)St= 80ii)St= 120iii) St= 150

Secondly , assuming the probability of each of the three levels of St, is 1/3 and risk is measured by standard deviation, show that going short is 400 shares provides a partial hedge to the portfolio.