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Suppose that you own 20,000 shares of stock XYZ, the spot price of this stock is S = $100 per share, and its market beta

Suppose that you own 20,000 shares of stock XYZ, the spot price of this stock is S = $100 per share, and its market beta is 1.4. The current S&P 500 index value is 1,000 and one S&P 500 futures contract is a promise to pay $250 times the index. A. How would you use S&P 500 futures to make your stock portfolio market neutral (i.e., make the market beta = 0)? B. How would you reduce the market beta to 0.35?

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