Business, 27.03.2021 05:20 avillarreal332

The Dow Jones is currently valued at $24,000 and the 1-year Dow Jones Mini Future contract has a price of $24,750. Note Dow Jones future contracts are for 5 times the value of the contract price. The risk free rate is 3% per annum and the Dow Jones dividend yield is 0.75% per annum. You are managing a portfolio that is worth $15 million and has a beta of 1.25.A) What position in futures contracts on the S&P 500 is necessary to hedge the portfolio? B) 6 months have passed and the Dow Jones is now valued at $24,720 and the future price is now $25,100. What is our portfolio value of your portfolio with the hedge from part a?

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