Assume That You Manage a $3 Million Portfolio That Pays

Multiple Choice

Assume that you manage a $3 million portfolio that pays no dividends and has a beta of 1.45 and an alpha of 1.5% per month. Also, assume that the risk-free rate is 0.025% (per month) and the S&P 500 is at 1,220. If you expect the market to fall within the next 30 days, you can hedge your portfolio by ______ S&P 500 futures contracts (the futures contract has a multiplier of $250) .

A) selling 1
B) selling 14
C) buying 1
D) buying 14
E) selling 6