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A portfolio manager wishes to leverage her equity position using index futures to a beta of 1.8. She currently has a well-diversified $260 million equity portfolio with a beta of 1. The current price of the S&P futures index is 1,200 (multiplier of $250). How many contracts are necessary to adjust the beta of this portfolio?

A portfolio manager wishes to leverage her equity position using index futures to a beta of 1.8. She currently has a well-diversified $260 million equity portfolio with a beta of 1. The current price of the S&P futures index is 1,200 (multiplier of $250). How many contracts are necessary to adjust the beta of this portfolio?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A portfolio manager wishes to leverage her equity position using index futures to a beta of 1.8. She currently has a well-diversified $260 million equity portfolio with a beta of 1. The current price of the S&P futures index is 1,200 (multiplier of $250). How many contracts are necessary to adjust the beta of this portfolio?
Transcribed Image Text:A portfolio manager wishes to leverage her equity position using index futures to a beta of 1.8. She currently has a well-diversified $260 million equity portfolio with a beta of 1. The current price of the S&P futures index is 1,200 (multiplier of $250). How many contracts are necessary to adjust the beta of this portfolio?
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