Please assist with the given problems. Give step by step computations for each.
If the S&P contracts have a multiplier of $500 and your $2.0M hedge fund stock portfolio has a beta of 1.2, then your portfolio position can be hedged from overall stock market volatility for 3 months by selling how many S&P futures contracts beginning of the quarter? Assume the S&P index is at 1,200 and for simplicity, your portfolio pays no dividends.
Assume if your portfolio alpha is 4%. What would be your portfolio return if the stock market declines by 10% during the quarter? Explain your answer.