Fund X invests in the Malaysian equity market. It has RM5 million in value and has a beta of 1.4. Your market analyst reported an expected slowdown in the Malaysian economy due to the spread of...

Illustrate how the market risk exposure can be reduced for Fund X. Determine the total portfolio value if the KLCI trades at 1,550 points after 3 months.

Extracted text: Fund X invests in the Malaysian equity market. It has RM5 million in value and has a beta of 1.4. Your market analyst reported an expected slowdown in the Malaysian economy due to the spread of Covid-19. You would like to reduce the market exposure of beta to 1 by using derivatives. Currently, FTSE Bursa Malaysia KLCI stands at 1,600 points. The corresponding 3-month futures (FKLI) is trading at 1,590 points with contract size of RM50 per index point.