4. Suppose the S&P 500 currently has a level of 4200. The continuously compounding return on a 1-year T-bill is 4.25%. (Treasury bill rate is one of the benchmark interest rates.) You wish to hedge a $3,000,000 stock portfolio that has a beta of 1.2 and a correlation of 1.0 with the S&P 500. (a) What is the 1-year futures price for the S&P 500 assuming no dividends? (b) How many S&P 500 futures contracts should you short to hedge your portfolio? What return do you expect on the hedged portfolio?

4. Suppose the S\&P 500 currently has a level of 4200 . The continuously compounding return on a 1-year T-bill is 4.25%. (Treasury bill rate is one of the benchmark interest rates.) You wish to hedge a $3,000,000 stock portfolio that has a beta of 1.2 and a correlation of 1.0 with the S\&P 500. (a) What is the 1-year futures price for the S\&P 500 assuming no dividends? (b) How many S\&P 500 futures contracts should you short to hedge your portfolio? What return do you expect on the hedged portfolio