. Rodrigo wants to add 300 shares of Centerpoint Energy common stock to his portfolio this year. He could buy the stock today. However, he is concerned about the risk that the stock might fall in price in the near future. At the same time, he would like to benefit from any gains should the price rise. Thus, he plans to implement the strategy using call options to protect against downside risk for a future purchase. (Hint: see Section C in Lecture 7A) Rodrigo plans to delay the purchase of Centerpoint Energy stock for 3 months Here is the market information when Rodrigo implements his strategy Currently, the spot price of Centerpoint Energy common stock is $25 per share. A call option on Centerpoint Energy common stock has 100 shares as the underlying asset . For call options with a strike price of $25 that expire on the future date when he plans to buy the stock, the premium currently is $1.82 per share The continuously compounded, annualized risk free rate for this scenario is 2.89% Now "jump ahead" in time to the date when Rodrigo buys the Centerpoint Energy common stock and when the call option expires. Suppose that the price of Centerpoint Energy common stock is $19.71. What is Rodrigo's total profit or loss on his strategy? NOTE: apply the exact formula or calculation. Do not approximate by treating the risk-free rate as zero. Do not round values at intermediate steps in your calculations. Enter your answer in dollars and cents to the penny, but omit the $ symbol and commas. For example, enter $1.234.56 as 1234.56 as your answer. If your answer is a loss, then enter the value with a minus sign, for example. -1234.56 Miranda wants to add 500 shares of Apple common stock to her portfolio this year. She could buy the stock today. However, she is concerned about the risk that the stock might fall in price in the near future. At the same time, she would like to benefit from any gains should the price rise. Thus, she plans to implement the strategy using call options to protect against downside risk for a future purchase. (Hint: see Section C in Lecture 7A.) Miranda plans to delay the purchase of Apple stock for 2 months Here is the market information when Miranda implements her strategy Currently, the spot price of Apple common stock is $150 per share. A call option on Apple common stock has 100 shares as the underlying asset. For call options with a strike price of $150 that expire on the future date when she plans to buy the stock, the premium currently is $8.80 per share. . The continuously compounded, annualized risk free rate for this scenario is 1.09% Now "jump ahead" in time to the date when Miranda buys the Apple common stock and when the call option expires. Suppose that the price of Apple common stock is $179.32. What is Miranda's total profit or loss on her strategy? NOTE: apply the exact formula or calculation. Do not approximate by treating the risk free rate as sero. Do not round values at intermediate steps in your calculations. Enter your answer in dollars and cents to the penny, but omit the $ symbol and commos. For example, enter $1,234.56 as 1234.56 as your answer. If your answer is a loss, then enter the value with a minus sign, for example, -1234.56 Suppose that you are a mutual fund manager. Your fund invests in a diversified portfolio of small cap common stocks. Your benchmark is the Russell 2000 Index. The Russell 2000 Index is designed to measure the performance of the bottom 2,000 companies from a universe of the 3,000 largest stocks in the U.S. Your fund recently received $8,840,000 in cash to invest in common stocks. You could immediately invest the cash in additional shares of stocks that your fund currently holds for reasons consistent with your fund's objective. However, you have concerns that the stock market has significant risk of a major correction in the near future. You are concerned that if you buy stocks today, then these shares will be at risk of significant decline in value in the short run Thus, you plan to implement the strategy using call options to protect against downside risk for a future purchase. (Hint: see Section in Lecture 7A) You plan to delay the purchase of stocks for your fund for 2 months Here is the market information when you implement your strategy . Currently, the spot market value of the Russell 2000 Index is 2210. A call option on the Russell 2000 Index has a contract multiplier of $100. (This option is cash settled in the same way as call options on the S&P 500 index) For call options with a strike price of 2210 that expire on the future date when you plan to buy the stocks, the premium currently is $56.00 . The continuously compounded, annualized risk free rate for this scenario is 2.11% Now "jump ahead' in time to the date when you buy the small cap common stocks for your mutual fund and when the call option expires. Suppose that the Russell 2000 index is 1,763. What is your fund's total profit or loss on his strategy? NOTEapply the exact formula or calculation. Do not approximate by treating the risk-free rate as zero. HINT: recall that we can think of the index value as if it were a share price. We can think of the index multiplier as if it were number of shares underlying the index call option Do not round values at Intermediate steps in your calculations. Enter your answer in dollars and cents to the penny, but omit the $ symbol and commas . For example, enter $1,234 56 as 1234,56 as your answer. If your answer is a loss, then enter the value with a minus sign, for example, -1234.56 . You currently hold 100 shares of Citigroup common stock in your taxable brokerage account. You plan to sell your stock simply because you believe that this stock no longer suits the objectives of your portfolio. However, you bought the stock only 10 months ago. In order to pay the capital gains tax rate on your gains rather than the higher ordinary income tax rate, you need to hold the stock for two more months. Unfortunately, this plan exposes your portfolio to the risk that Citigroup's stock price might fall (perhaps significantly) before you complete your sale. You would like protection from this risk. Thus, you plan to implement the protective put strategy. (Hint: see Section Din Lecture 7A.) Here is the market information when you implement your strategy. Currently, the spot market value of Citigroup is $72 per share. Put options on Citigroup common stock have 100 shares of stock as the underlying asset. . Put options that expire in two months with a strike price of K$72.50 have a premium of $8.52 per share. The continuously compounded, annualized risk free rate for this scenario is 2.68% Now "jump ahead in time to the date when you sell your Citigroup stock and when the put option expires. Suppose that the stock price is 65.11. What is your total profit or loss on this strategy? NOTE: apply the exact formula or calculation. Do not approximate by treating the risk-free rate as zero. Do not round values at intermediate steps in your calculations. Enter your answer in dollars and cents to the penny, but omit the $ symbol and commas. For example, enter $1,234.56 as 1234,56 as your answer. If your answer is a loss, then enter the value with a minus sign for example, -123456