Calculate the profit or loss on the stock index

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Question - You have a portfolio value of 25,000,000 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.

Reference no: EM132172376

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