Exhibit 21.8 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

Multiple Choice

Exhibit 21.8
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider a portfolio manager with a $20,500,000 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 1250 and has a multiplier of 250. The portfolio beta is 1.25.
-Refer to Exhibit 21.8. Assume that a month later the equity portfolio has a market value of $20,000,000 and the stock index future is priced at 1150 with a multiplier of 250. Calculate the profit on the stock index futures position.

A) $1,550,000
B) -$2,000,000
C) $2,050,000
D) -$5,000,000
E) $2,400,000