Facts:

Assume you have AUD500,000 invested in an equal-weighted portfolio on April 1, 2022 for 3 months. The portfolio will comprise four Australian stocks: NCM, NST, EVN and PRU all of which are from the gold exploration and production sector.

Questions:

1. Identify a major risk (general risk)

2. Methodology (calculations - based on past) for identification of major risk

3. Rationale (reasons) for selection of futures contract for hedging

Terminology (relevant to data):

Data (can be copied and pasted into excel):

\begin{tabular}{|l|l|l|l|l|} \hline & & \multicolumn{1}{l}{ Beta (as 01/04/2022)} \\ \hline NCM.AX & Newcrest Mining Limited \\ \hline NST.AX & Northern Star Resources Ltd \\ \hline EVN.AX & Evolution Mining Limited \\ \hline PRU.AX & Perseus Mining Limited \\ \hline & & 0.7554 \\ \hline & & 0.1287 \\ \hline Contract Code & Future contract name \\ \hline GC & CME Gold Futures \\ \hline YAP & ASX SPI 200 Index Futures \\ \hline AUD = & AUSTRALIAN DOLLAR/US DOLLAR FX SPOT RATE \\ \hline \end{tabular} for some markets closed during the period, previous trading date data were used