Problem 20-15 (Static) Suppose a hedge fund follows the following strategy. Each month it holds $100 million of an S&P 500 Index fund and writes It out-of-the-money put options on $100 million of the Index with exercise price 5% lower than the current value of the Index. Suppose the premium It receives for writing each put is $0.25 million, roughly In line with the actual value of the puts. The risk-free rate is 0.7% monthly End of month September-77 October-77 November-77 December-77 January-78 February-78 Mar-78 April-78 May-78 June-78 July-78 August-78 September-78 October-78 November -78 December-78 January-79 February-79 March-79 Aprilil-79 May-79 June-79 July-79 August-79 September-79 October-79 November-79 December-79 January-80 February-80 March-89 S&P 580 96.53 92.34 94.83 95.10 89.25 87.04 89.21 96.83 97.24 95.53 108.68 183.29 102.54 93.15 94.70 96.11 99.93 96.28 101.59 101.76 99.08 102.91 103.81 199.32 199.32 101.82 106.16 107.94 114.16 113.66 102.09 End of month April-80 May-80 June-80 July-80 August-80 September-80 October-80 November-se December-80 January-81 February-81 March-81 Aprilil-81 May-81 June-81 July-81 August-81 September-81 October-81 November-81 December-81 January-82 February-82 March-82 Aprilil-82 May-82 June-82 July-82 August-82 September-82 October-82 S&P see 186.29 111.24 114.24 121.67 122.38 125.46 127.47 140.52 135.76 129.55 131.27 136.00 132.81 132.59 131.21 138.92 122.79 116.18 121.89 126.35 122.55 128.40 113.11 111.96 116.44 111.88 109.61 107.e9 119.51 120.42 133.72 End of month November-82 December-82 January-83 February-83 March-83 April-83 May-83 June-83 July-83 August-83 September-83 October-83 November-83 December-83 January-84 February-84 March-84 April-84 May-84 June-84 July-84 August-84 September - 84 October-84 November-84 December -84 January-85 February-85 March-85 April-85 May-85 S&P 500 138.53 140.64 145.30 148.26 152.96 164.43 162.39 167.64 162.56 164.40 166.07 163.55 166.40 164.93 163.41 157.06 159.18 160.05 158.55 153.18 158.66 166.68 166.10 166.09 163.58 167.24 179.63 181.18 188.66 179.83 189.55 End of month July-85 August -85 September -85 October-85 November -85 December -85 January-86 February-86 March-86 April-86 May-86 June-86 July-86 August -86 September-86 October-86 November-86 December-86 January-87 February-87 March-87 Aprilil-87 May-87 June-87 July-87 August-87 September -87 October-87 S&P 500 191.85 198.92 188.63 182.08 189.82 202.17 211.28 226.92 238.90 235.52 247.35 258.84 236.12 252.93 231.32 243.98 249.22 242.17 274.08 284.20 291.70 288.36 299.10 3e4.ee 318.66 329.88 321.83 251.79 Required: a. Calculate the Sharpe ratio the fund would have realized in the period October 1982- September 1987. (Do not round Intermediate calculations. Round your answer to 3 decimal places.) Sharpe ratio b. Now calculate the Sharpe ratio the fund would have realized If we extend the sample perlod by one month to Include October 1987. (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Sharpe ratio
