How many put option contracts should be purchased

Assignment Help Finance Basics
Reference no: EM1344768

A portfolio manager in charge of a portfolio worth $10 million is concerned that the market might decline rapidly during the next six months and would like to use options on the S&P 100 to provide protection against the portfolio falling below$9.5 million. The S&P 100 index is currently standing at 500 and each contract is on 100 times the index.

1. If the portfolio has a beta of 1, how many put option contracts should be purchased?

2. If the portfolio has a beta of 0.5, how many put options should be purchased?

Reference no: EM1344768

Questions Cloud

How fast was she moving at the start of her coast : An electric dipole is formed from +/-4.0 nC point charges spaced 3mm apart. The dipole is cantered at the origin, oriented along the y-axis. What is an electric field strength at point (x,y) = ( 6.0 cm, 0 cm)
Explain what is the value of the firm : Explain what is the value of the firm and explain what will the value be if Corrado converts to 50% debt?
What is the theoretical greatest amount of ice freezer : Assume the freezer operates for 5 hours each day, how much power does it require while operating
How far from base of the table did it strike the floor : A projectile is fired at an upward angle of 45° from the top of a 308m cliff with a speed of 198 m/s. What will be its speed while it strikes the ground below? (Use conservation of energy.)
How many put option contracts should be purchased : If the portfolio has a beta of 1, how many put option contracts should be purchased and If the portfolio has a beta of 0.5, how many put options should be purchased?
Discuss elements of financial statements : Suppose you are deciding whether or not to invest in a particular firm. Discuss which basics of which financial statements you would want to carefully examine.
What is an index of refraction of the glass : A little cat, Bella, walks in a straight line, which we shall call the x axis, with positive direction to the right. As an observant scientist, you make measurements of her motion and construct a graph of the little feline's velocity as a function..
Completing transaction using sql : Write down the complete transaction using SQL.
Explain what long position in the stock : Explain what long position in the stock is necessary to hedge a short call option when the strike price is $32 and provide the number of shares purchased as a percentage of the number of options that have been sold

Reviews

Write a Review

Finance Basics Questions & Answers

  Find effective annual rate under the line of credit

Cumberland Furniture wants to establish a prearranged borrowing contract with a local commercial bank. The bank's terms for a line of credit are 3.30 percent over the prime rate, & each year the borrowing must be decreased to zero for a 30-day period..

  Bonds-carrying value and interest expense

A company issues $5,000,000, 7.8%, 20-year bonds to yeild 8% on January 1, 2007. Using effective-interest amortization, what will the carrying value of bonds be on December 31, 2007 balance sheet?

  Calculation of termination fees

Calculation of termination fees and as required under the terms of the terminated merger agreement among Stone

  Description of valuation models

Divido Corp. Is an all-equity financed firm with the total market value of $100 million. The company holds $10 million is cash equivalents and has $90 million in other assets.

  Find present value of cash flows

You just signed a consulting contract that will pay you $38,000, $52,000, and $85,000 yearly at the end of the next three (3) years, respectively.

  Determine the effective quarterly rate

Determine the effective quarterly rate and the nominal annual rate, What is the spreadsheet function to find the nominal annual rate above

  Describing non-value maximizing mergers in finance world

Describe how Agency problems can lead to non-value maximizing mergers in finance world.

  Tvm concept-value of money

XYZ company has a balloon payment coming due from the recent acquisition. What TVM concept (s) is represented in the condition? What is the value of money represented by the situation?

  Calculation of return on investment and residual income

Calculation of return on investment and residual income and Calculate the missing amounts for each division

  Calculation of npv and irr of project

Calculation of NPV and IRR of project and calculate IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged

  Computation of value of the bond

Computation of value of the bond and what is the bond's price based on semi-annual compounding

  Information about capital market instruments

Describe and critically discuss the capital market instruments used in investment portfolio.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd