Currently you are holding a portfolio of stocks worth RM2,465,000. You wish to hedge your portfolio. You have the following information:

Portfolio Beta = 0.90 Spot Index Value= 1530 points Risk Free Rate = 6% per annum 3 month Stock Index Futures Contract = 1,544.20 Expected Dividend Yield = 0%

The multiplier is RM50

(i) Determine the number of SIF contract to fully hedge your portfolio. (3 marks) (ii) Outline the hedge strategy and show the resulting portfolio value assuming the market falls 20% by futures maturity. (14 marks)