Hedge the systematic risk in its portfolio

Assignment Help Finance Basics
Reference no: EM131213921

Modern Portfolio Managers (MPM) hold a 19 million dollar portfolio of stocks with a beta of 1.25 measured with respect to the S&P 400 index. The current value of the index is 955 and the current value of a futures contract on the index is 1018.0. The multiplier on the futures equals $250. If MPM wishes to hedge the systematic risk in its portfolio, how many contracts must it buy or sell?

Reference no: EM131213921


Write a Review


Finance Basics Questions & Answers

  Analyzing the statement of cash flow

How would a manager determine if he/she should purchase a large piece of equipment by analyzing the statement of cash flow?

  Gd has a beta of 08 the yield on a 3-month t-bill is 4 and

gd has a beta of 0.8. the yield on a 3-month t-bill is 4 and the yield on a 10 year t bond is 6. the market risk

  Explain the logic behind conclusion

It has been shown that in the absence of taxes and other market imperfections firm value will be unaffected by dividend policy. Explain the logic behind this conclusion.

  Calculating expected stock price

Kirkland Motors expects to pay a $2 / share dividend on common stock at the end of the year. The stock currently sells for $20 per share. The required rate of return on corporation's stock is 12% [ks = .12].

  Market value of the firm common equity

The firm's beta is 1.25, the risk-free rate is 8 percent, and the market risk premium is 4 percent. If the market is in equilibrium, what is the market value of the firm's common equity (1 million shares outstand­ing)?

  Determine value of the preferred share

A company issued a preferred stock which matures in thirty years and carries a maturity value of $45. The dividend is $4 per year over the 30 year period.

  Discussion on the value of the firm

Discussion on the Value of the Firm -   Subscribe Hide Description Please discuss the following: 1) Why the goal of Maximization of the Value of the Firm important for Corporations? 2) How would the firms go about achieving this goal?

  If you can invest money elsewhere at 8 compounded

if you can invest money elsewhere at 8 compounded semi-annually what should be the market value present value for a

  The companys beta is 125 the required return on the market

schnusenberg corporation just paid a dividend of d0 0.75 per share and that dividend is expected to grow at a constant

  Estimate the monthly payment

A loan was made ten years ago with an original balance of $1,000,000.00 at a fixed interest rate of 8.00% with equal monthly payments for thirty years.

  Information for a bank quoting on spot exchange rates

information for a bank quoting on spot exchange rates

  Compute the amount of profit

A corporation sells lawnmowers for $895 each. The variable cost per lawnmower is $520. The corporation's monthly fixed costs are $84,500.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd