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1. Talbot Insurance Co. has a portfolio with a current value of 5 million and a beta of 1.2 with respect to the FTSE
1. Talbot Insurance Co. has a portfolio with a current value of 5 million and a beta of 1.2 with respect to the FTSE 100. The FTSE 100 currently stands at 6200 points and the option contract size is 10 per index point. The risk-free rate of interest is 5% per annum and the dividend yield for both the index and the portfolio is 2%. If Talbot decides not to hedge, what will the value of its portfolio be in 6 months if the FTSE 100 stands at 6107 points?
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International Financial Reporting and Analysis
Authors: David Alexander, Anne Britton, Ann Jorissen
5th edition
978-1408032282, 1408032287, 978-1408075012
