All else the same, as the price of a S&P 500 futures used to hedge an equity portfolio increases, the number of contracts needed to hedge the portfolio will:
A) increase.
B) decrease.
C) not change.
D) increase if the beta of the portfolio is greater than one.
E) decrease if the beta of the portfolio is greater than one.

Question

Quizplus · Accepted Answer

As the price of S&P 500 futures increases, the value of each contract increases, meaning fewer contracts are needed to hedge the same value of an equity portfolio.

All Else the Same, as the Price of a S&P