An investment manager has a $4 million equity portfolio consisting of $1 million invested in Apple shares and $3 million in GM shares. The Apple shares have a market beta of 1.3, The GM shares have a market beta of 0.95. There is an index futures contract where each contract is for 10 times the index. The current index futures price is H IE4.66 and the spot price of the index is SI 12351. How many index futures contracts should the investment manager hold to implement a riskminimizing hedge strategy?

 An investment manager has a $5 million portfolio consisting of $2 million invested in Citigroup shares and $3 million invested in IBM shares. The Citigroup shares have retum standard deviation of 0.25 and the IBM shares have return standard deviation of 0.30. The two shares have a correlation of 0.45. 1What is the standard deviation of the investment manager's portfolio retum? 

 Heating oil spot prices and crude oil itures prices have a correlation of 0.55. Heating oil spot prices have a standard deviation of 0.5 whereas crude oil futures prices have a standard deviation of 0.3. What is the minimum variance hedge ratio for hedging heating oil prices with crude oil futures? 

. On October 1"1 ABC Corporation goes long steel futures contracts to hedge its planned purchase of200 tons of steel in six month's time. The corporation uses a hedge ratio of50%. Each futures contract is for delivery of 10 tons ofsteel; the contract has an initial margin of E400 and a maintenance margin ofE300. The spot price on October I" is105 per ton and the futures price is 101. How much cash must ABC Corporation deposit in its margin account to open its itures position?

 A speculator goes short 50 oil rtures contracts on June 1". when the spot price is $|25 per barrel and the futures price is $124 per barrel. Each contract is for 10 barrels ofoil. The next day, June 2"", the spot price has not changed and is still $IZS, but the change in the basis is $2. 1What is the speculator's prot that day?