3) 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 1,250, one contract is on 250 times the index, the risk-free rate is 6% per annum, and the dividend yield on the index is 3% per annum. The current 3-month futures price is 1,259. a) What position should the fund manager take to eliminate all exposure to the market over the next two months? I b) Calculate the effect of your strategy on the fund manager's returns if the level of the market in two months is 1,300. Assume that the one-month futures price is 0.25% higher than the index level in two months