What options should be purchased to provide protection

Reference no: EM131237731

1. Suppose that a portfolio is worth $60 million and the S&P 500 is at 1,200. If the value of the portfolio mirrors the value of the index, what options should be purchased to provide protection against the value of the portfolio falling below $54 million in one year's time?

2. Consider again the situation in Problem 16.16. Suppose that the portfolio has a beta of 2.0, the risk-free interest rate is 5% per annum, and the dividend yield on both the portfolio and the index is 3% per annum. What options should be purchased to provide protection against the value of the portfolio falling below $54 million in one year's time?

Reference no: EM131237731

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