It is 16th July. A company has a portfolio of stocks worth $100 million. The beta of the portiolio is 1.2. The company would like to use the December futures contract on a stock index to change the beta of the portfolio to 0.5 during the period 16th July to 16th November. The index is currently 1,000, and each contract is $250 times the index. What position should the company take?
It is 16th July. A company has a portfolio of stocks worth $100 million. The beta of the portiolio is 1.2. The company would like to use the December futures contract on a stock index to change the beta of the portfolio to 0.5 during the period 16th July to 16th November. The index is currently 1,000, and each contract is $250 times the index. What position should the company take?
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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
Transcribed Image Text:It is 16th July. A company has a portfolio of stocks worth $100 million. The beta of
the portiolio is 1.2. The company would like to use the December futures contract
on a stock index to change the beta of the portfolio to 0.5 during the period 16th
July to 16th November. The index is currently 1,000, and each contract is $250
times the index. What position should the company take?
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