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Question: sampp 500 index is currently priced at 1000 a futures...

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S&P 500 index is currently priced at 1,000. A futures contract on the S&P 500 index is currently priced at 1,010. Each futures contract is on $250 times the index price. The dividend yield on the index is 0.25% per year. The risk free rate is 1% per year. The value of a portfolio is currently worth $5,050,000 and the beta of this portfolio is 1.5. The portfolio manager wants to hedge this portfolio for 1 year using the above futures contract on the S&P500 index. After one year, what is the value of the hedged position if The S&P 500 index is 1050, the futures contract on the index is 1053.
 
5,099,938
4,664,937

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