Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You manage a $15 million hedge fund portfolio with beta = 1.2 and alpha = 2% per year. Assume the risk-free rate is 2% per
You manage a $15 million hedge fund portfolio with beta = 1.2 and alpha = 2% per year. Assume the risk-free rate is 2% per year and the current value of the S&P 500 Index is 1,500. You want to exploit the positive alpha, but you are afraid that the stock market may fall and you want to hedge your portfolio by selling 3-month S&P 500 future contracts. The S&P contract multiplier is $250.
What is the expected return on the hedged portfolio?
Group of answer choices
2%
0%
3%
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