1. Question 77

   1 Point

   Use the following to answer the next two questions.

   Suppose you are the portfolio manager for a $100 million fund. You are concerned that a declining portfolio value would look bad in the end-of-year report your fund will provide to its interested parties. How can you use the stock index futures to hedge against the risk? Currently, Dec S&P 500 futures contract closed at 1500. Spot value of S&P 500 was 1470. Trade unit for S&P 500 futures contract is $250 times index number.

   What is the value of one contract of DEC S&P 500 futures?

   1. 150000

   2. 225000

   3. 3000000

   4. 375000

2. Question 78

   1 Point

   Assuming that the beta of your portfolio is 1.2, calculate the number of futures contract to hedge your portfolio. Long or short?

   1. 24 contracts short

   2. 32 contracts short

   3. 24 contracts long

   4. 32 contracts long