How much should be invested in the equity portfolio

Assignment Help Financial Management

Reference no: EM132044647

Imagine you are a provider of portfolio insurance. You are establishing a 4-year program. The portfolio you manage is currently worth $122 million, and you hope to provide a minimum return of 0%. The equity portfolio has a standard deviation of 19% per year, and T-bills pay 6% per year. Assume for simplicity that the portfolio pays no dividends (or that all dividends are reinvested).

a-1. How much should be placed in T-bills? (Round your answer to 2 decimal places. Enter your answer in millions. Omit the "$" sign in your response.)

T-bills $ million

a-2. How much should be invested in the equity portfolio? (Round your answer to 2 decimal places. Enter your answer in millions. Omit the "$" sign in your response.)

Portfolio in equity $ million

b-1. What is the new delta of the portfolio if the portfolio value drops by 6 percent on the first day of trading? (Round your answer to 4 decimal places. Negative amount should be indicated by a minus sign.)

Delta of the portfolio

b-2. Complete the following (Round your answer to 2 decimal places. Enter your answer in millions. Omit the "$" sign in your response.):

Assuming the portfolio does fall by 6%, the manager should (Click to select)sellbuy) ------ $ million in stock.

References

eBook & Resources

Reference no: EM132044647

Questions Cloud

Halliburton buys construction equipment : Suppose that the U.S. firm Halliburton buys construction equipment from the Japanese firm Komatsu at a price of ¥220 million.

What is the current ratio and quick ratio : SDJ, Inc., has net working capital of $1,165, What is the current ratio? What is the quick ratio?

Pure expectation theory explain the shape of yield curve : Based on the spot rates you calculated, what does the yield curve like? Use the pure expectation theory explain the shape of this yield curve.

Assume you will be owner and employee of your business : Assume you will be an owner and an employee of your business. What level of liability exposure does your business form create?

How much should be invested in the equity portfolio : Imagine you are a provider of portfolio insurance. How much should be invested in the equity portfolio?

The area of operation marketing and human resource : What are the strength and weakness of ebay in the area of operation marketing and human resource.

Additional risk associated with birdkeeping : After age, socioeconomic status, and smoking have been controlled for, is an additional risk associated with birdkeeping?

Market believe will be stock price at the end of three years : Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years?

The primary purpose of cash discount : The primary purpose of a cash discount is to. The economic order quantity (EOQ) is best defined as the:

User Account

All Pages