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107
A company has a $36 million portfolio with a beta of 1.2. The futures price for a contract on an index is 900. Futures contracts on $250 times the index can be traded. What trade is necessary to increase beta to 1.8?
A.Long 192 contracts
B.Short 192 contracts
C.Long 96 contracts
D.Short 96 contracts
A.Long 192 contracts
B.Short 192 contracts
C.Long 96 contracts
D.Short 96 contracts
Answer: C
To increase beta by 0.6 we need to go long 0.6×36,000,000/(900×250) or 96 contracts
To increase beta by 0.6 we need to go long 0.6×36,000,000/(900×250) or 96 contracts
Flashcard info:
Author: CoboCards-User
Main topic: Finance & Investment
Topic: Derivatives
Published: 27.10.2015