Suppose that JPMorgan Chase sells call options on $1.05 million worth of a stock portfolio with beta = 1.40. The option delta is 0.50. It wishes to hedge its resultant exposure to a market advance by buying a market-index portfolio. Suppose it use market index puts to hedge its exposure. The index at current prices represents $2,000 worth of stock.

a.How many dollars' worth of the market-index portfolio should it purchase?

b.What is the delta of a put option?(Round your answer to 2 decimal places. Negative amount should be indicated by a minus sign.)

c.Complete the following:(Round your answer to 1 decimal place. Negative amount should be indicated by a minus sign.) Assuming the 1 percent market movement, JP Morgan should Buy or Sell? How many put contracts?.

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