(a) While covered calls and protective puts are used to manage risks, there is misconception about the use of these two. For example, some considers that covered calls offer a guaranteed return. Explain with examples the suitability of covered calls and protective puts in managing equity risks. Show calculations and graphs. (5 marks) (b) A fund manager wishes to fully immunize a current liability by investing in a bond portfolio comprising of the following two bonds: Characteristics Bond A Bond B Face value $1,000 $1,000 Settlement 1 July 2020 1 July 2020 Maturity 30 June 2027 30 June 2025 Coupon rate (per annum) Zero 4 percent Yield to maturity (per annum) 6 percent 6 percent Frequency of coupon Semi-annual Semi-annual If the modified duration of the liability is 5.45, what should be the bond portfolio composition (i.e., weight of each bond in the portfolio)? (5 marks) (a) While covered calls and protective puts are used to manage risks, there is misconception about the use of these two. For example, some considers that covered calls offer a guaranteed return. Explain with examples the suitability of covered calls and protective puts in managing equity risks. Show calculations and graphs. (5 marks) (b) A fund manager wishes to fully immunize a current liability by investing in a bond portfolio comprising of the following two bonds: Characteristics Bond A Bond B Face value $1,000 $1,000 Settlement 1 July 2020 1 July 2020 Maturity 30 June 2027 30 June 2025 Coupon rate (per annum) Zero 4 percent Yield to maturity (per annum) 6 percent 6 percent Frequency of coupon Semi-annual Semi-annual If the modified duration of the liability is 5.45, what should be the bond portfolio composition (i.e., weight of each bond in the portfolio)