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Suppose a trader is trying to hedge equity portfolio of beta 1.8 using futures on stock market index. His portfolio is worth $10M today. Assume

  1. Suppose a trader is trying to hedge equity portfolio of beta 1.8 using futures on stock market index. His portfolio is worth $10M today. Assume that the index futures price is $5,000 and each contract is written on 200 times the index. If he take 5 short positions in the stock market index futures, what would be the beta of hedge portfolio?

    A. 0 B. 0.3 C. 1 D. 1.2 E. 1.3

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