Consider a stock portfolio consisting of shares of 4 firms. Their values today, AUG 10, 2021 in the portfolio are $3,000,000; $2,500,000; $2,500,000 and $2,000,000. Their respective betas with the SP500 index are: 1.4; 1.7; 1.3 and 0.7. The respective returns on these stocks over last year were: 11%; 5%; -4% and 2%.

2.1 Calculate the portfolios beta.

2.2 Calculate the portfolios annual rate of return.

2.3 Today, AUG 10, 21, the price of the DEC2021 SP500 Index futures is:

FOCT 30, DEC = 4,500. The SP500 Index futures dollar multiplier is $250.

Use a time table and show how to open a two-month hedge to protect the portfolio value using h = .8.