How many contracts must it buy or sell

Assignment Help Financial Management
Reference no: EM131449416

Modern Portfolio Managers (MPM) hold a 4.5 million dollar portfolio of stocks with a beta of 1.1 measured with respect to the S&P 500 index. The current value of a futures contract on the index is 1069. 1. 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? a. Buy 18.52 b. Buy 1.0454 c. Sell 18.52 d. Sell 16.836 e. Sell 1.0454.

Reference no: EM131449416

Questions Cloud

What are diseconomies of scale and why might they occur : What are diseconomies of scale and why might they occur?
Identify your favorite video and tell me which one it is : Identify your favorite video and tell me which one it is and why it is your favorite. "Could TED Talks for Managers be a valuable resource, and why?"
An investor enters into a short oil futures contract : An investor enters into a short oil futures contract when the futures price is $18.0 per barrel.
External benefits to society : Analyze the external benefits to society and their efficient delivery:
How many contracts must it buy or sell : 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?
Result of adult deaths : If the average adult produces @20,000 of output per year, how much global output is lost as a result of adult deaths from secondhand smoke?
University admission process : Calculate the cycle time of activities 1 and 2 documents arrive to University Admissions and checking for completeness of the documents.
Do a failure mode effect criticality analysis : Do a failure mode effect criticality analysis for any new model of smart phone from Samsung - develop a "House of Quality" matrix and "Quality Plan"
An investor enters into a long oil futures contract : An investor enters into a long oil futures contract when the futures price is $18.75 per barrel.

Reviews

Write a Review

Financial Management Questions & Answers

  Maximum interest rate he should accept in order to buy seats

Jimmy wants to purchase a new set of bucket seats for his van. He has bad credit, so he finds a place that will sell him the seats via an add-on loan. The seats cost $900 total. Jimmy in willing to pay up to $90 per month for one year for these seats..

  The current annual dividend yield will

As compared to bonds selling at par, the same series of bonds selling at a discount will have yields that are: The market value of a common stock decreases in value but the company's management decides to make no change in dividends paid. The current..

  If interest rates are low bond prices are high

Guided Response: Review several of your classmates’ posts. Respond to at least two classmates by sharing your view of their conclusion. Are there any other factors that you can offer that may explain why the bond is selling at a premium or discount? ..

  Real average risk free rate and average risk free premium

You’ve observed the following returns on Crash-n-Burn Computer’s stock over the past five years: 14 percent, –14 percent, 16 percent, 26 percent, and 10 percent. Suppose the average inflation rate over this period was 3.5 percent and the average T-bi..

  Compare and contrast the yields and maturities

Compare and contrast the yields and maturities for each of the securities and discuss which you would hold and why relative to interest rate risk.

  Dividends are expected to grow at constant rate

Gilmore, Inc., just paid a dividend of $2.65 per share on its stock. The dividends are expected to grow at a constant rate of 6 percent per year, indefinitely. Assume investors require a return of 10 percent on this stock. What is the current price? ..

  Would doing so be helpful in the investment analysis

Is it worth the effort to estimate daily project cash flows? - Would doing so be helpful in the investment analysis?- How would the results be negatively or positively affected?

  Callculate the present value of a perpetuity bond

Callculate the present value of a perpetuity bond that is expected to pay 300 interest per year if the investor requires an annual return of 12 percent?

  What is the aftertax cost of the company debt

Ying Import has several bond issues outstanding, each making semiannual interest payments. The bonds are listed in the table below. Bond Coupon Rate Price Quote Maturity Face Value 1 8.70 % 105.2 7 years $ 22,000,000 2 7.00 95.2 10 years 42,000,000 3..

  According to the price-earnings valuation method

The industry average P/E ratio for the construction industry is 18.5 Key Construction, Inc.’s expected earnings per share for next year is $3.50. According to the price/earnings valuation method, what is the value of Key’s stock?

  Increase in the publics expectations of future inflation

Loanable funds theory practice: show a graph how events a b and will affect supply and demand for Loans and equilibrium interest rate. consumer and investors confidences increases. signs of economic growth cause an increase in the public’s expectatio..

  What is the real risk free rate

5-year Treasury bonds yield 6.4%. The inflation premium (IP) is 1.9%, and the maturity risk premium (MRP) on 5-year T-bonds is 0.4%.- What is the real risk-free rate, r*?

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