Well-diversified stock portfolio

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A well-diversified stock portfolio has $40m value, and a beta 1.22 relative to S&P 500 index. The portfolio manager anticipates a bearish horizon. Instead of liquidating, he or she sells N contracts of S&P 500 stock index futures. Suppose one futures contract = $500 futures price in points or notional value. Suppose the S&P 500 futures price is now 1500 points. Suppose the rate of change of the S&P 500 index is the same as the rate of change of the futures index. What is N if the manager wants to hedge perfectly?

Reference no: EM132016299

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