Question 5 a. Assume that you have managed an equity portfolio. The portfolio beta is 1.15. Assume that the price of the FKLI futures contract is 1105 and the multiplier is 250. Calculate the number of contracts you would need to hedge your position and indicate whether you would go "short" or "long", if you anticipate: i. a decline in equity values, and wish to hedge RM500 million of the portfolio. (2 marks) ii. a rise in equity values, and wish to increase equity exposure on RM500 million of the portfolio. (2 marks) b. Assume that you manage an equity portfolio worth RM20,000,000. The portfolio has a beta of 1.1. The current value of the KLCT stock index is 1200 and the value of a FKLI stock index futures contract is 250 times the KLCI index value. Calculate: i. the number of futures contracts you would buy (or sell) to completely hedge the (3 marks) portfolio against an expected market decline. il. the profit (or loss) on your futures position if the KLCI stock index declines 5 percent over the next few months. (3 marks) A. ii. the profit (or loss) on your unhedged equity portfolio if the KLCI stock index declines 5 percent over the next few months. (3 marks) d. Below are the information on three portfolios, the market and the risk free rate (RFR): Portfolio Return Beta SD A1 0.15 -1.25 0.182 AZ 0.1 -0.9 0.223 A3 0.12 1.1 0.138 Market 0.11 1 0.2 RFR 0.03 0 0 f Calculate and choose the best portfolio based on: L the Sharpe Measure. marks) (4 marks) il the Jensen alpha Measure. (4 marks) . the Treynor Measure. TOTAL 25 MARKS