A portfolio manager decides to hedge his equity portfolio with index future contracts. The correlation between the portfolio value and future price is 0.7.the standard deviation of the portfolio value is 30%and that of future price is 40% per annum.Calculate the hedge ratio and comment on your results (10 marks)

There are key common orders, discuss the major types of orders in future contracts(5 marks)

A nine month future contract on non dividend paying stock with a share price of sh 100 and risk free rate of return of 10% per annum. The theoretical future price is sh 120.

Determine: Cash and Arbitrage opportunity if the actual future price available in the market is:

i.Sh110(5 marks)

ii.Sh130(5 marks)