A company has a $36 million portfolio with a beta of 1.2. The futures price for a contract on the S&P index is 900. Futures contracts on $250 times the index can be traded. What trade is necessary to eliminate all systemic risk in the portfolio?

a)200 long

b)192 short

c)187 long

d) 150 short

Question 2

A company has a $36 million portfolio with a beta of 1.2. The futures price for a contract on the S&P index is 900. Futures contracts on $250 times the index can be traded. What trade is necessary to reduce beta to 0.9?

• a)54 short
• b)50 short
• c)48 short
• d)52 short

Futures contracts trade with every month as a delivery month. A company is hedging the purchase of the underlying asset on June 15. Which futures contract should it use?

• The August contract
• The June contract
• The May contract
• The July contract