Dosley Endowment Fund, which supports the activities of the Dosley Charitable Trust, is relatively new and small in terms of assets under management. The trustees of the endowment have adopted a conservative investment strategy: at the current time, all of the $730 milion in assets are equally invested in an S&P 500 Index tracking fund and U.S. Treasury bonds. Right now, the annual dividend yield on the S&P 500 Index fund is 3.4%, whereas the annual coupon rate is 4.8% for the T-bonds. As the fund manager, you expect that over the next three months the market will be very volatile. Given that the priority of the trustees is to preserve the value of the endowment fund, you are required to use various derivative strategies to protect the assets under management. The current level of S&P 500 is 1,000, and the price of U.S. T-bonds is 100. Assume that the current three-month T-bill rate is 1.4% a. Using the derivative information listed below, determine the details of two derivative strategies that could be employed to protect the endowment's current asset value. Do not round intermediate calculations. Round your answers to the nearest whole number. Contract size Expiration S&P 500 Index Current price Strike price Call option $45,000 3 months later $22.50 $1,000 Put option Future 45,000 3 months later 19.50 1,000 220,000 3 months later 1,008.50 U.S. Treasury Bonds Call option Put option Future $105,000 3 months later $7.50 $100 105,000 3 months later 105,000 3 months later 8.50 100.35 100 Alternative 1: -Select- S&P 500 put options and Government bond put options. Alternative 2: -Select- S&P futures and -Select- S&P call options and bond call options. Government bond futures and b. Applying the put-call parity relationship, which derivative strategy should you recommend and why? Do not round Intermediate calculations. Round your answers to the nearest cent. Recall that the put and futures prices are as follows: Put Price Call Price - Security Price + Present Value of Exercise Price and Income on the Underlying Security (Treasury Bill Income - Income on the underlying Security) Futures Price Underlying Security Price Alternative 1: S&P 500 put price: $ Bond put price: $ For the S&P 500 the put options appear -Select- and the Government bond put options appear -Select- compared to the prices of the calls. Alternative 2: S&P 500 future price: $ Bond future price: 5 For the S&P 500 the futures are Select- and the Government bond futures are -Select- -Select- is recommended because protection is gained by -Select-