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Homework answers / question archive / January Stock Market Futures Market KLSE composite index stands at 1162

January Stock Market Futures Market KLSE composite index stands at 1162

Finance

January Stock Market Futures Market KLSE composite index stands at 1162. Buys March KLSE Cl contracts at 1158 Investor expects to purchase a RM10million stock portfolio in two months' time KLSE composite index has risen to Sells March KLSE CI contracts at 1173 1171, making the acquisition costs of the shares more expensive. March a. Explain why the investor has undertaken this particular hedging strategy. (5 marks) b. Assume that the investor wants to cover the full value of their expected investment. How many March KL SE CI futures contracts must they purchase? (5 marks) c. Calculate the profit/loss on the spot transaction. (5 marks) d. Calculate the profit/loss on the futures transaction. (5 marks) e. Is the hedging strategy efficient? (5 marks) Note: Please show all workings. You may opt to write your answer in the HTML editor and/or upload an attachment

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