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 put options on an index to provide protection against the portfolio falling below $9.5 million.The index is currently standing at 500 and each contract is on 100 times the index. What should the strike price of options on the index be the portfolio has a beta of 1?
A. 425
B. 450
C. 475
D. 500
C
When the portfolio declines in value by 5%, the index can be expected to decline in value by 5%. The strike price should therefore be 0.95×500=475 .
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a. true b. false
Which of the following is true of additional terms being added under the Uniform Commercial Code?
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