MGT 4451 Name: Spring 2009

MGT 4451
Spring 2009
March 24, 2009
1. Pricing Stock Index Futures: Calculate the price of an S&P500 future contract with 60
days until settlement. Today’s level of S&P500 1,376.11; dividend yield is 1.63% and Tbill rate is 4.15%.
2. You manage a portfolio of stocks worth 45 mil and beta 1.2. You expect downturn and
you want to protect your portfolio by cutting beta in half using S&P500 futures with
September settlement 1405. How many contracts you need? What will be your position
on those contracts?
You need to short approximately 154 contracts for perfect hedge or 77 to decrease beta to .6