Q3. JJW holds 50,000 shares of stock AAA. AAA stock trades today for $30/share. JJW decides to use the E-Mini S&P500 index futures for the next 3 months to hedge the price fluctuations of AAA stock. Today, the 5-month E-Mini S&P500 index futures price is 1,500; its $m = $50. AAA stocks beta with this index is 1.3.

Use a time table to show how JJW opens a minimum variance hedge ratio hedge today.

Q4. In the same time table you used in Q3. show the results of the hedge if three months from now the AAA stock price is:

4.1 $35/share and the E-Mini S&P500 index level is 1,650.

4.2 $26/share and the E-Mini S&P500 index level is 1,450.