On July 16, 2021 a stock portfolio market value is $75,000,000. The portfolios manager (PM) expected that the market was on its way down in the next 5 months and used the MAR 2022 E-mini S&P500 index futures to hedge the portfolio value. On July 16, 2021 the portfolios beta with the E-minim S&P500 index was beta = 1.25; the index futures value for MAR 2022 delivery was 1,250; and the index dollar multiplier was $m =$50.

A. Use a time table to exhibit the hedge PM opened on July 16, 2021.

Date Cash Market Futures Market

B. 5 months later, on DEC 14, 2016 the E-mini S&P500 index was at 1,000. The portfolio lost value by:

the exact same proportion as the E-mini S&P500 index multiplied by its beta.

Use the same table you opened in 6.1 to show the result of the hedge and calculate its effect on the portfolios value.