Referring to the portfolio described in the previous question, you have calculated the Beta of your stocks to be 2.0 and would like to decrease it down to 0.5. The market value of your stock portfolio is currently $2,000,000 and one year Micro S&P 500 futures are trading at 4,500. The times index (multiplier) of the futures is $5. How many contracts would you need to sell (or buy?) to achieve your objective? Please, disregard the margin requirements and assume the risk-free rate is low enough to be neglected. Round your answer to the second digit after the decimal point (i.e 33.75 or 11.43) even though in reality it is not possible to trade fractional contracts.

Hint:

# of futures = (Mkt_value_of_stocks / (Multiplier x Futures_price)) x Beta_stocks x X;where X is the absolute value of the desired percentage change in Beta.

Assume you set the hedge described in the previous question. On the expiration date of the futures, the S&P 500 index closes at 3,600 (a 20% decrease). Please, find the approximate market value of your stock portfolio. Again, we assume the risk-free rate is negligibly small. Express your answer in dollars and cents, but omit the $ sign.

Reusing the assumptions from the previous questions, please find the profit or loss on your futures position on the expiration date. Express your answer in dollars and cents, but omit the $ sign. If you have generated a loss, make sure to include the negative sign in your answer.