Question
You have a portfolio value of 25,000,00o and what to protect it against market decline using the S&P 500 index. The value of the S&P
You have a portfolio value of 25,000,00o and what to protect it against market decline using the S&P 500 index. The value of the S&P 500 is at 2578 with a portfolio beta of 1.35. Complete the following:
a. How many contracts do you need to protect yourself against this market decline? Are you long or short these contracts?
b. Assume that two months later your portfolio has a value of 23,500,00 and the stock index is priced at 2680. Calculate the profit/loss on your equity position.
c. Say two months later the portfolio is valued at 25,500,000 and the S&P is at 2500. Calculate the profit/loss on the stock index futures position
d. Calculate the overall profit in dollars and Holding Period Return in percent.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started