I'm worried about the impact of an economic downturn on the value for a future project. I have determined that the projects beta is 0.75 (value was found by regressing the projects expected returns on the S&P 500 Index returns).

A. Will you buy or sell the futures contract to protect the downside risk? Ans: I will buy a future contract to hedge risk?

B. Will you buy/sell one full contract or a fraction of a contract, assuming the latter is possible? What fraction will you buy or sell? I will buy 25% of a contract since my beta is .75?

C. Suppose on maturity the index is down 10%. Show that the futures contract will completely protect the downside, if the above relationship holds.

** I don't understand question C