Pigeon Ltd holds a well-diversified portfolio of shares with a current market value on 1 May 2004 of $900,000.On this date Pigeon Ltd decides to hedge the portfolio by taking a sell position in ten SPI futures units.The All Ordinaries SPI is 2,980 on 1 May 2004.A unit contract in SPI futures is priced based on All Ordinaries SPI and a price of $25.The futures broker requires a deposit of $1,500.On 30 June the All Ordinaries SPI has fallen to 2,570 and the value of the company's share portfolio has fallen to $790,000.What is the gain or loss on the futures contract and the net gain or loss after hedging?
A. Loss on futures contract: $102,500; Net gain after hedging: $6,000
B. Gain on futures contract: $10,250; Net loss after hedging: $99,750
C. Gain on futures contract: $102,500; Net loss after hedging: $7,500
D. Gain on futures contract $164; Net loss after hedging: $109,836
E. None of the given answers.

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The Answer of Pigeon Ltd holds a well-diversified portfolio of shares with a current market value on 1 May 2004 of $900,000.On this date Pigeon Ltd decides to hedge the portfolio by taking a sell position in ten SPI futures units.The All Ordinaries SPI is 2,980 on 1 May 2004.A unit contract in SPI futures is priced based on All Ordinaries SPI and a price of $25.The futures broker requires a deposit of $1,500.On 30 June the All Ordinaries SPI has fallen to 2,570 and the value of the company's share portfolio has fallen to $790,000.What is the gain or loss on the futures contract and the net gain or loss after hedging?
A. Loss on futures contract: $102,500; Net gain after hedging: $6,000
B. Gain on futures contract: $10,250; Net loss after hedging: $99,750
C. Gain on futures contract: $102,500; Net loss after hedging: $7,500
D. Gain on futures contract $164; Net loss after hedging: $109,836
E. None of the given answers.

Pigeon Ltd Holds a Well-Diversified Portfolio of Shares with a Current