How many contracts should you enter

Assignment Help Finance Basics
Reference no: EM131982332

Question: You manage a $16.5 million portfolio, currently all invested in equities, and believe that the market is on the verge of a big but short-lived downturn. You would move your portfolio-temporarily into T-bills, but you do not want to incur the transaction costs of liquidating and reestablishing your equity position. Instead, you decide to temporarily hedge your equity. holdings with S&P 500 index futures contracts.

a. Should you be long or short the contracts? Why?

b. If your equity holdings are invested in a market-index fund (beta = 1), into how many contracts should you enter? The S&P 500index is now at 1, 650 and the contract multiplier is. $250. How does your answer to (b) change if the beta-of your portfolio is 6?

Reference no: EM131982332

Questions Cloud

Constructive and destructive interferences : Light is one kind of electromagnetic waves. describe what are called constructive and destructive interferences and what are the conditions for constructive
Write a paper on a topic related to the interaction of music : For this assignment, you are required to write a 5 page paper on a topic related to the interaction of music, technology, and culture.
Define your inventory-related costs by using a source : Define your Inventory-Related Costs by using a source other than the textbook. Give a clear, concise overview of essential elements relevant to understanding.
What is the difference in speed : If both children start at the top of the 41.2 m tall hill initially at rest, what is the difference in speed between these two sleds at the bottom of the hill?
How many contracts should you enter : If your equity holdings are invested in a market-index fund (beta = 1), into how many contracts should you enter? The S&P 500index is now at 1, 650.
Coefficient of kinetic friction between block-floor surfaces : Consider a block-spring system as shown below. The spring has a spring constant of 133 N/m, while the block has a mass of 5.31 kg.
Evaluate the appropriateness of health education pamphlets : Evaluate the appropriateness of one of the following health education pamphlets for adult with low health literacy - Reference a minimum of three scholarly
Develop your ability to use strategic planning tools : Develop your ability to use strategic planning tools. Contribute to your ability to assess the strategic directions and plans for Walmart Canada.
Who is responsible for creating and sustaining great public : Who is responsible for creating and sustaining great public schools? What is your role - as a parent, teacher, student, administrator, community member.

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

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