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  3. 4. consider the following portfolio and revise it

4. Consider the following portfolio and revise it with futures contracts. Stock...

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Finance

4. Consider the following portfolio and revise it with futures contracts.

Stock 8,000,000

Bonds 4,000,000

Cash 2, 000 000

Total 14,000,000

S&P 500 index futures = 4060 with multiplier of 250. You decide to go short 5 stock futures contracts.

Treasury bonds futures are priced at 125-24. You decide to go long 12 Treasury bond futures contracts.

T. bond futures are based on $100,000 par value.

PortfolioCurrent WeightFutures PositionRevised PortfolioRevised Weights

Stock=8 mil

Bonds=4 mil

Cash=2 mil

Total 14 mil

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