Homework due Mar 23, 2022 17:00 EET Question 4 (Part A) 1 point possible (graded) As an investment banker, you have just secured an IPO deal for New Deal Inc (NDI), a company using blockchain technology to complete business contracts. You have committed to issue 30 million shares of NDI at an IPO price of $40/share. It is now two weeks before the IPO date and the stock market has been volatile. You are concerned about a potential drop of the overall market, which may overwhelm any expected profit from the deal. In order to hedge the market risk of this deal, you are considering using S&P 500 futures. The contract size is $250 times the S&P 500 index. The current index level is 3000. Using data on similar companies traded in the market, you estimate NDI has a market beta of 0.8. 1 point and 1 attempt (a) If you want to hedge the overall risk of the stock market, should you go long or short the S&P 500 futures? Long Short Question 4 (Part B) 0.0/2.0 points (graded) 2 points and 2 attempts (b) How many S&P 500 futures contracts should you long/short? (report a positive float number with at least two decimals) contracts Please round your answers to at least two digits. e.g., if the answer is 19/17, submit 1.12. 1.1 will be marked as incorrect! 1.1176 will be accepted. Make sure you provide the type of answer required. Pay special attention to units specified in the trailing text after the blanks. (e.g., %) When submitting your answer, make sure you do not leave empty blanks. Do not use % and S signs. Submit You have used 0 of 2 attempts Save Question 4 (Part C) 1 point possible (graded) 1 point and 1 attempt (c) Is this a perfect hedge? Yes No Homework due Mar 23, 2022 17:00 EET Question 4 (Part A) 1 point possible (graded) As an investment banker, you have just secured an IPO deal for New Deal Inc (NDI), a company using blockchain technology to complete business contracts. You have committed to issue 30 million shares of NDI at an IPO price of $40/share. It is now two weeks before the IPO date and the stock market has been volatile. You are concerned about a potential drop of the overall market, which may overwhelm any expected profit from the deal. In order to hedge the market risk of this deal, you are considering using S&P 500 futures. The contract size is $250 times the S&P 500 index. The current index level is 3000. Using data on similar companies traded in the market, you estimate NDI has a market beta of 0.8. 1 point and 1 attempt (a) If you want to hedge the overall risk of the stock market, should you go long or short the S&P 500 futures? Long Short Question 4 (Part B) 0.0/2.0 points (graded) 2 points and 2 attempts (b) How many S&P 500 futures contracts should you long/short? (report a positive float number with at least two decimals) contracts Please round your answers to at least two digits. e.g., if the answer is 19/17, submit 1.12. 1.1 will be marked as incorrect! 1.1176 will be accepted. Make sure you provide the type of answer required. Pay special attention to units specified in the trailing text after the blanks. (e.g., %) When submitting your answer, make sure you do not leave empty blanks. Do not use % and S signs. Submit You have used 0 of 2 attempts Save Question 4 (Part C) 1 point possible (graded) 1 point and 1 attempt (c) Is this a perfect hedge? Yes No