You are given the following information about a portfolio you are to manage. For the long-term you are bullish, but you think the market may fall over the next month.;Portfolio Value: $1 million;Portfolio's Beta: 0.86;Current S&P500 Value 990;Anticipated S&P500 915;a. If the anticipated market value materializes, what will be your expected loss on the portfolio?;b. What is the dollar value of your expected loss?;c. For a 75-point drop in the S&P500, by how much does the index change?;d. How many contracts should you buy or sell to hedge your position? (fractions permitted)
Market Value and Hedge Positions Given Expected Market Drop
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