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Could you please answer both please, I'm running out of questions this month You are a coffee dealer anticipating the purchase of 80,000 pounds of
Could you please answer both please, I'm running out of questions this month
You are a coffee dealer anticipating the purchase of 80,000 pounds of coffee in three months. You are concerned that the price of coffee will rise, so you take a long position in coffee futures. Each contract covers 37,500 pounds, and so, rounding to the nearest contract, you decide to go long in two contracts. The futures price at the time you initiate your hedge is 55.95 cents per pound. Three months later, the actual spot price of coffee turns out to be 58.56 cents per pound and the futures price is 59.2 cents per pound. Calculate the actual effective cost (in cents) at which you purchased your coffee. (Keep 2 decimal places) Question 4 1 pts Alex Andrew, who manages a $95 million large-capitalization U.S. equity portfolio, currently forecasts that equity markets will decline soon. Andrew prefers to avoid the transaction costs of making sales but wants to hedge $15 million of the portfolio's current value using S\&P 500 futures. Because Andrew realizes that his portfolio will not track the S\&P 500 Index exactly, he performs a regression analysis on his actual portfolio returns versus the S&P futures returns over the past year. The regression analysis indicates a risk-minimizing beta of 0.88 with an R2 of 0.92. Futures Contract Data: S\&P 500 futures price 1,000 S\&P 500 index 999 S\&P 500 index multiplier 250 Calculate the number of futures contracts required to hedge $15 million of Andrew's portfolio, using the data shown. In your answer, indicate whether the hedge is long (+) or short(-). You are a coffee dealer anticipating the purchase of 80,000 pounds of coffee in three months. You are concerned that the price of coffee will rise, so you take a long position in coffee futures. Each contract covers 37,500 pounds, and so, rounding to the nearest contract, you decide to go long in two contracts. The futures price at the time you initiate your hedge is 55.95 cents per pound. Three months later, the actual spot price of coffee turns out to be 58.56 cents per pound and the futures price is 59.2 cents per pound. Calculate the actual effective cost (in cents) at which you purchased your coffee. (Keep 2 decimal places) Question 4 1 pts Alex Andrew, who manages a $95 million large-capitalization U.S. equity portfolio, currently forecasts that equity markets will decline soon. Andrew prefers to avoid the transaction costs of making sales but wants to hedge $15 million of the portfolio's current value using S\&P 500 futures. Because Andrew realizes that his portfolio will not track the S\&P 500 Index exactly, he performs a regression analysis on his actual portfolio returns versus the S&P futures returns over the past year. The regression analysis indicates a risk-minimizing beta of 0.88 with an R2 of 0.92. Futures Contract Data: S\&P 500 futures price 1,000 S\&P 500 index 999 S\&P 500 index multiplier 250 Calculate the number of futures contracts required to hedge $15 million of Andrew's portfolio, using the data shown. In your answer, indicate whether the hedge is long (+) or short(-)Step by Step Solution
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