USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider a portfolio manager with a $10,000,000 equity portfolio under management. The manager wishes to hedge against a decline in share values using stock index futures. Currently a stock index future is priced at 1350 and has a multiplier of 250. The portfolio beta is 1.50.
-Refer to Exhibit 15.13. Calculate the overall profit.
A) -$50,000
B) -$150,000
C) $50,000
D) $150,000
E) $550,000

Question

Quizplus · Accepted Answer

The overall profit from hedging can be calculated without needing the specific details of the futures contracts or the portfolio's beta. The question does not provide enough information (such as the change in the futures price or the change in the portfolio value) to calculate the profit from hedging accurately. Therefore, without additional details, it's not possible to determine the exact profit from the hedge. The choices provided seem to suggest specific amounts, but without the necessary calculations or data, these cannot be validated. Thus, the correct answer cannot be determined from the information given, making this a trick question or possibly a mistake in the question setup.