Question
Suppose we have a $10M portfolio that has a beta of .89. You decide to hedge this portfolio using S&P 500 index options. The S&P
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Suppose we have a $10M portfolio that has a beta of .89. You decide to hedge this portfolio using S&P 500 index options. The S&P 500 index is currently at 3,557.54. You choose to use put options that expire in 30 days with a strike price of 3500. The risk free rate is .5%. The volatility of the S&P 500 is .22. This is the same data as the previous question.
Suppose the S&P 500 index drops 5%. How much does our portfolio lose in value?(theroetically)
A. 550,000
B. 600,000
C. 500,000
D. $445,000
Suppose we have a $10M portfolio that has a beta of .89. You decide to hedge this portfolio using S&P 500 index options. The S&P 500 index is currently at 3,557.54. You choose to use put options that expire in 30 days with a strike price of 3500. The risk free rate is .5%. The volatility of the S&P 500 is .22. This is the same data as the previous question.
Suppose the S&P 500 index drops 5%. How much does our portfolio lose in value?(theroetically)
| A. | 550,000 | |
| B. | 600,000 | |
| C. | 500,000 | |
| D. | $445,000 |
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Intermediate Accounting
Authors: Donald E. Kieso, Jerry J. Weygandt, And Terry D. Warfield
13th Edition
978-0470423684
