You have been assigned to implement a three-month hedge for a stock mutual fund portfolio that primarily invests in medium-sized companies.

You have been assigned to implement a three-month hedge for a stock mutual fund portfolio that primarily invests in medium-sized companies. the mutual fund has a beta of 1.58 measured relative to the s&p midcap 400, and the net asset value of the fund is $198 million.

a. should you be long or short in the midcap 400 futures contracts? short long

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b. assuming the midcap 400 index is at 667 and its futures contract size is 500 times the index, determine the appropriate number of contracts to use in designing your cross-hedge strategy. (do not round intermediate calculations. round your answer to the nearest whole number.)

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