A Canadian portfolio manager holds a C$25 million all-equity portfolio with an estimated beta of 0.75. She believes the market will perform poorly over the coming months and decides to use four- month S&P/TSX60 futures contracts, which are currently quoted at 1,251, to decrease the portfolio's exposure to systematic risk. Each futures contract is for the delivery of C$200 times the index. The current level of the S&P/TSX60 index is 1,244 and it has an estimated dividend yield of 3% per annum. The current risk-free interest rate is 1% per annum. Answer the following questions in the boxes provided below each question. (a): What is the number of futures contracts required to decrease the beta of the overall position to 0.5 over the next four months? Answer (1 mark): (b): Is a long or a short position in the futures required? Answer (0.5 marks): After three months the S&P/TSX60 index has fallen to 1,162, the new futures price is 1,153, and the portfolio manager decides to close out the futures position. (c): Has the portfolio manager made a profit or a loss on their futures trade? Answer (0.5 marks): (d): What is the dollar amount gained/lost on the futures trade? Answer (1 mark): A Canadian portfolio manager holds a C$25 million all-equity portfolio with an estimated beta of 0.75. She believes the market will perform poorly over the coming months and decides to use four- month S&P/TSX60 futures contracts, which are currently quoted at 1,251, to decrease the portfolio's exposure to systematic risk. Each futures contract is for the delivery of C$200 times the index. The current level of the S&P/TSX60 index is 1,244 and it has an estimated dividend yield of 3% per annum. The current risk-free interest rate is 1% per annum. Answer the following questions in the boxes provided below each question. (a): What is the number of futures contracts required to decrease the beta of the overall position to 0.5 over the next four months? Answer (1 mark): (b): Is a long or a short position in the futures required? Answer (0.5 marks): After three months the S&P/TSX60 index has fallen to 1,162, the new futures price is 1,153, and the portfolio manager decides to close out the futures position. (c): Has the portfolio manager made a profit or a loss on their futures trade? Answer (0.5 marks): (d): What is the dollar amount gained/lost on the futures trade? Answer (1 mark)