A portfolio manager wants to apply risk management techniques using forward and futures strategies. The manager had $ 5,000,000 in the portfolio. He wants to increase the beta exposure from 0.8 to 1.1 Beta on futures is 1.05 and total futures price is $240,000.

A) Calculate the required number of futures contracts to get to 1.1 (1 mark)

B) Calculate the required number of futures contracts to get to 0 (0.5 mark)

Continuing with the question, assume the unhedged portfolio increased in value 5.1% from $5,000,000 to $5,255,000 and futures price also increased 5.1% from 240,000 to 252,240. One month remains to contract expiration. The market had a return of 5.2%. For each scenario, compute the

i) Hedged portfolio ending value (1 mark)

ii) Ex-post beta (0.5 mark)