An investment management firm wishes to increase the beta for one of itsportfoliosunder management from 1.1 to 1.50 fora six-month period.The portfolio has a market value of $120,000,000. The investment firm plans to use a futures contract priced at $105,790in order toadjust the portfolio beta. The futures contract has a beta of 0.98.

A. Calculate the number of futures contracts that shouldbe boughtor sold toachieve an increase inthe portfolio beta.

B. At the end of the three months, theoverallequity market is up 5.5 percent. The stock portfolio under management is up 5.1 percent. The futures contractis pricedat $111,500. Calculate the value of the overall position and the effective beta of the portfolio