Use the following information for questions a through f. A $100 million portfolio consists of 35 million of stock with a beta of 1 and 65 million of bonds at a modified duration of 8. As a portfolio manager, youd like to change the allocation to 50 million of stock and 50 million of bonds. In addition, youd like to adjust the beta to 1.2 and the modified duration to 7.25. A stock index futures contract has a price of $225,000 and we can assume the beta is 1. A bond futures contract is priced at $92,000 with an implied modified duration of 5.9.

a. In the aggregate how many stock futures contracts must you transact?

Select one: a. Sell 66 contracts b. Buy 111 contracts c. Buy 100 contracts d. Sell 44 contracts

b. If you want to synthetically sell 15 million of bonds, how many futures contracts should you transact?

Select one: a. Buy 123 contracts b. Sell 123 contracts c. Buy 173 contracts d. Sell 173 contracts

c. In order to increase the beta from 1 to 1.2 you must

Select one: a. Buy 13 contracts b. Sell 44 contracts c. Buy 44 contracts d. Sell 13 contracts

d. In the aggregate how many bond futures contracts must you transact?

Select one: a. Sell 242 contracts b. Buy 242 contracts c. Sell 173 contracts d. Buy 69 contracts

e. If you want to synthetically buy 15 million of stock, how many futures contracts should youtransact?

Select one: a. Buy 32 contracts b. Buy 52 contracts c. Sell 44 contracts d. Buy 67 contracts

f. In order to lower the modified duration you must

Select one: a. Buy 21 contracts b. Sell 69 contracts c. Sell 21 contracts d. Buy 69 contracts