1. The S&P 500 Index price is 1492.28 and its annualized dividend yield is 2.30%. LIBOR is .2%. How many futures contracts will you need to hedge a $240 million portfolio with a beta of 1.16 for one year? (Show your Work)
2. Two months from today you plan to borrow $3 million for 3 months at LIBOR. You hedge your interest rate risk with a euro dollar futures contract priced at 93.6. If settled in arrears, what is your payment if the 3-month LIBOR rate is 2.5% (not annualized) in two months?
3. Six months from today you plan to borrow $433 million for 6 months at LIBOR. You hedge 100% of your interest rate risk with a euro dollar futures contract priced at 99.4. If settled in arrears, what is your payment if the 6-month LIBOR is 2.5625% in six months?
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