54. By design,the Nikkeiindex futures attaches500(Yen)toeach point of the Nikkei 225share index. Suppose, in July, the Nikkei225 index is at 25,000and in the futures market the index levelis at 25,500.(Yen) is the Japanese currency. (25Marks)

a.A fund manager has invested 200million in the Nikkei 225index. Proposea strategy for this fund manager to hedge against the index volatility for the full amount of investment. BMAN21011 b.Suppose, in December, the Nikkei 225index dropsto 22,000,and the level of its futuredrops to 23,500. Calculate the gains/losses inthe futures market and the cash marketrespectively. Show your steps. (8Marks) c.Suppose, in December, the Nikkei 225 index rises to 28,000, and the level of its futureincreases to 27,500, calculate the gains/losses in the futures market and the cash market respectively. Show your steps. (8Marks)