Suppose the S&P index spot price is 2000. Over the next year you wish to hedge a $4 million portfolio that has a beta of 2. S&P futures contracts have a one-year maturity and a contract multiplier of 250. The S&P index pays no dividends.

How many S&P 500 futures contracts should you sell to hedge your portfolio?

Briefly explain whether your overall hedged portfolio is riskless.

How would your answer to part b) change if your portfolio was a well-diversified US equity fund.