Use the following information for questions 34 through 39. A $100 million portfolio consists of 35 million of stock 'with a beta of 1 and 65 million of bonds at a modified duration of 8. As a portfolio manager, you'd like to change the allocation to 50 million of stock and 50 million of bonds. In addition, you'd like to adjust the beta to 1.2 and the modified duration to 7.25. A stock index futures contract has a price of $225,000 and we can assume the beta is 1. A bond futures contract is priced at $92,000 with an implied modified duration of 5.9. If you want to synthetically sell 15 million of bonds, how many futures contracts should you transact? Select one: O a. Buy 173 contracts O b. Sell 123 contracts c. Sell 173 contracts O d. Buy 123 contracts
Use the following information for questions 34 through 39. A $100 million portfolio consists of 35 million of stock 'with a beta of 1 and 65 million of bonds at a modified duration of 8. As a portfolio manager, you'd like to change the allocation to 50 million of stock and 50 million of bonds. In addition, you'd like to adjust the beta to 1.2 and the modified duration to 7.25. A stock index futures contract has a price of $225,000 and we can assume the beta is 1. A bond futures contract is priced at $92,000 with an implied modified duration of 5.9. If you want to synthetically sell 15 million of bonds, how many futures contracts should you transact? Select one: O a. Buy 173 contracts O b. Sell 123 contracts c. Sell 173 contracts O d. Buy 123 contracts
Foundations of Business (MindTap Course List)
6th Edition
ISBN:9781337386920
Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Publisher:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Chapter15: Using Management And Accounting Information
Section: Chapter Questions
Problem 6DQ
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