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Please explain how to get the answer 1055. Thank you! (Information repeated, question further below). You manage a well-diversified stock portfolio worth $10 million with
Please explain how to get the answer 1055. Thank you!
(Information repeated, question further below). You manage a well-diversified stock portfolio worth $10 million with a beta of 1.27 and you want to hedge your portfolio over the next 4 months using a 6-month futures contract on the LMC Index. The LCM Index currently has a value of 1,000. A futures contract on the LMC Index is for the delivery of $250 times the futures value. The risk free rate is 6% per annum continuously compounded and the index pays a dividend of 3% per annum. Question: After 4 months, the index has increased to 1,050. What is the futures index value at that time (after 4 months)? 1,066 1,050 1,082 1,061 1,055Step by Step Solution
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