Fund X invests in the Malaysian equity market. It has RM5 million in value and has a beta of 1.4. Your market analyst reported an expected slowdown in the Malaysian economy due to the spread of Covid-19. You would like to reduce the market exposure of beta to 1 by using derivatives. Currently, FTSE Bursa Malaysia KLCI stands at 1,600 points. The corresponding 3-month futures (FKLI) is trading at 1,590 points with contract size of RM50 per index point.

Fund X invests in the Malaysian equity market. It has RM5 million in value and has a beta of 1.4. Your market analyst reported an expected slowdown in the Malaysian economy due to the spread of Covid-19. You would like to reduce the market exposure of beta to 1 by using derivatives. Currently, FTSE Bursa Malaysia KLCI stands at 1,600 points. The corresponding 3-month futures (FKLI) is trading at 1,590 points with contract size of RM50 per index point.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 15P

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