Find the optimal stock index futures hedge ratio if the portfolio is worth $1,200,000,the beta is 1.15 and the S&P 500 futures price is 450.70 with a multiplier of 250.
A)10.65
B)12.25
C)6123.80
D)5325.05
E)none of the above

Question

Quizplus · Accepted Answer

The optimal hedge ratio is calculated as (Portfolio Value * Beta) / (Futures Price * Multiplier). Substituting the given values: (1,200,000 * 1.15) / (450.70 * 250) = 12.25.

Find the Optimal Stock Index Futures Hedge Ratio If the Portfolio