Problem $16-38($Algo$)$

You are a provider of portfolio insurance and are establishing a four$-$year program. The portfolio you manage is currently worth $$220$

million, and you promise to provide a minimum return of $0\%.$ The equity portfolio has a standard deviation of $25\%$ per year, and T$-$bills

pay $4\%$ per year. Assume that the portfolio pays no dividends.

Required:

a$-1.$ How much of the portfolio should be sold and placed in bills? $($Input the value as a positive value. Do not round intermediate

calculations and round your final percentage answer to $2$ decimal places.$)$

Portfolio in bills

a$-2.$ How much of the portfolio should be sold and placed in equity? $($Input the value as a positive value. Do not round intermediate

calculations and round your final percentage answer to $2$ decimal places.$)$

Portfolio in equity

b$-1.$ Calculate the put delta and the amount held in bills if the stock portfolio falls by $3\%$ on the first day of trading, before the hedge is

in place? $($Input the value as a positive value. Do not round intermediate calculations. Round your answers to $2$ decimal places.$)$