Assume that ASX 200 futures contracts are currently being quoted at 3256. How many contracts would the Pernellis have to buy (or sell) to set up the hedge? a. Say the value of the Pernellis’ portfolio...

Assume that ASX 200 futures contracts are currently being quoted at 3256. How many contracts would the Pernellis have to buy (or sell) to set up the hedge?

a. Say the value of the Pernellis’ portfolio dropped 12% over the course of the market retreat. To what level must the market-index futures contract move in order to cover that loss?

b. Given that a $7000 margin deposit is required to buy or sell a single ASX 200 futures contract, what would be the Pernellis’ return on invested capital if the price of the futures contract changed by the amount calculated in part (2a)?