On July 1, an investor holds 50,000 shares of a certain stock. The market price is $30 per share. The investor is interested in hedging against movements in the market over the next month and decides to use the September Mini S&P 500 futures contract. The index is currently 1,500 and one contract is for delivery of $50 times the index. The beta of the stock is 1.3. What strategy should the investor follow?

On July 1, an investor holds 50,000 shares of a certain stock. The market price is $30 per share. The investor is interested in hedging against movements in the market over the next month and decides to use the September Mini S&P 500 futures contract. The index is currently 1,500 and one contract is for delivery of $50 times the index. The beta of the stock is 1.3. What strategy should the investor follow?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section20.A: The Black-scholes Option Pricing Model

Problem 1P

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On July 1, an investor holds 50,000 shares of a certain stock. The market price is $30 per share. The investor is interested in hedging against movements in the market over the next month and decides to use the September Mini S&P 500 futures contract. The index is currently 1,500 and one contract is for delivery of $50 times the index. The beta of the stock is 1.3. What strategy should the investor follow to reduce beta to 0?
i.On April 1, an investor holds 40,000 shares of a certain stock. The market price is $28 per share. The investor is interested in completely hedging against movements in the market over the next month and decides to use the June Mini S&P 500 futures contract. The index is currently 4,500 and one contract is for delivery of $50 times the index. If the beta of the stock is 1.2, what strategy should the investor follow to completely hedge their stock portfolio? ii. After a month, the investor wishes to partially unwind their hedge to reach an overall target beta of 1. Using your answer from above, what strategy should the investor follow to reach their target? They still hold 40,000 shares and the market price is now $27.5 per share. The June Mini S&P Futures index is still at 4,500 and one contract for delivery is of $50 times the index. What will be the residual remaining position in their futures contracts?
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You are an option trader in an investment company. Through your research on the company PEAR, you believe that PEAR's stock price, which is currently trading at $50, will remain in a range between $45 and $55 over the next month. Which option trading strategy best suits your investment view? (All options expire in 30 days). Select one: O A. Buy a call with strike price $55 and write a put with strike price $45 OB. Write a call with strike price $55 and buy a put with strike price $45 O C. Write a call with strike price $55 and write a put with strike price $45 O D. Write a call with strike price $55 and short a share of the stock O E. Buy a call with strike price $55 and buy a put with strike price $45
solve a,b,c and d please. Round to the nearest dollar