QUESTION 3 a) Your work as a wealth advisor requires you to make appropriate recommendations to your clients. A young, wealthy man is seeking your advice on whether he should participate in a - hedge fund - mutual fund and/or - exchange traded fund The clients goal is to preserve his wealth from inflation and grow it gradually. He is fearful of risks. Discuss, with contrasting details, the 3 types of funds and whether each could be recommended to your client. (30 marks) b) TigerTwo Management currently manages $660 million of stocks in its portfolio. It is now 1st Jan 2021. With a volatile market in the months ahead due to the COVID pandemic, the fund manager is trying to hedge the market risk for the next three months by either short-selling an index-tracking fund QQ10, standing at $290 at the moment, or buying put options written on an QQ10 index-tracking fund. If the beta of its portfolio is estimated to be 1.25; the four-month interest rate is 1.50% with continuous compounding, and the annualized volatility is 55% for a March put option with strike price at $270 with three months to maturity. Assuming the Black-Scholes model holds, i. How much QQ10 should the fund managers sell if they prefer to hedge by shortselling the market? (5 marks) ii. Given the following formula, how many put options should be bought if they prefer to hedge with put options? d1 = T r T K S ) 2 ln( ) ( 2 + + Show your workings clearly.