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You are attempting question B out of 16 An active investor has 5 securities in his portfolio. On 1st January 2022 the current value of
You are attempting question B out of 16 An active investor has 5 securities in his portfolio. On 1st January 2022 the current value of investment of $12,681,600 with weighted beta of 1.31. The investor wants to go for full hedge using futures. The current S&P 500 index is 4900 and each lot of future has 200 units. The investor desires to have weighted beta of 0.92. Calculate the number of contracts to be sold for full hedge on 28th February 2022 to achieve the desired beta. It is known that the cost of capital of the investor is 11.5%. Assume 365 days a year and continuous compounding. (a) 4 contracts (b) 13 contracts (c) 5 contracts (d) 11 contracts Answer A B C D
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