S&P 500 Assume the following is from Winthrop Foundation's portfolio: Exhibit 1 Comparison of Winthrop's Portfolio to Possible Benchmarks Winthrop Statistic Portfolio Average price-to-book ratio 1.95 Beta relative to the benchmark Median market capitalization (U.S. dollar billions) 5.60 Volatility (annual) 12.0% Tracking error relative to the benchmark Dividend yield 1.86% A. from among the three possible benchmarks presented in Exhibit 1, the highest quality benchmark for Winthrop's portfolio. Justify your recommendation with two reasons, using information provided in Exhibit 1. 2.06 1.03 7.98 18.7% 1.87% 2.45% Russell 1000 2.13 0.85 3.28 10.3% 4.72% 2.08% Russell 3000 2.09 0.92 0.59 10.4% 2.07% 1.76% Exhibit 2 Fundamental Factor Model Micro-attribution Report for Winthrop's Portfolio Asset Allocation Asset Class Net Short US Stock 0.62 Non-U.S. Stock 17.29 148 Bonds 23.12 0.83 Other 0.08 0.00 Cash 508 13.92 Not Classified 0.38 0.00 100 Exposure Sector Region Category Long Cat. Index 54.73 56 0746.63 1877 19.03 33.57 23.95 22:51 19.68 008 1.64 006 18.98 7.03 0.00 0.38 129 0.08 -100% Cyclical Energy Sensitive Sectors Funds I Category% Basic Materials 3.69 Consumer Cyclical 12.18 1225 Financial Services 1721 16.44 Real Estate 314 4.33 Communication Services 3.94 3.19 6.02 5.49 Industrials 10.17 11.13 | Technology 20.51 19.35 Consumer Defensive 6.13 7.97 Healthcare 1267 13.07 Utilities 3.98 3.08 As of Jun 30, 2019 Category: Allocation-70% to 85% Equity | Sector data is based on the rescaled long position of the equity holdings B. With the information from Exhibit 2 i. talk about the overall asset allocation ii. discuss the manager overweight and underweight which sectors and which style of a fund this could be Defensive 20 Jacob, the foundation manager, holds a company called Walk2campus. He believes that the share price of Walk2campus, a hotel operating company, will be significantly influenced by the outcome of Rock hill's bid to host a football tournament. If Rock hill is selected, she believes that share price would rise significantly. If Rock hill is not selected, she believes that the share price would fall significantly. Jacob wants to profit from her beliefs by implementing a straddle. She gathers the information shown in Exhibit 3. Exhibit 3 Walk2campus Share and Options Data Current share price of Walk2campus Annual risk-free rate Price of one month call option, exercise price USD 9.00 Price of one month put option, exercise price USD 9.00 USD 8.80 1.50% USD 0.38 USD 0.57 C. Determine each of the following: i. the profit per share on the straddle if the Rock Hill wins the bid and the share price doubles. the two share prices of Walk2eampus at which breakeven for the straddle occurs. ii. iii. Explain why each of the following option strategies is less appropriate than a straddle, given Jacob's beliefs: bull spread short butterfly spread zero cost collar Many buildings at Winthrop were build in the 1980s, and it comes to the time to remodel them. Winthrop University Foundation plans to spend four Million dollars in the next eight years. The foundation is committed to spend equally 0.5 million dollars each year in the next eight years. This goal is essential to student success and should be managed in a way with lower risk. S&P 500 Assume the following is from Winthrop Foundation's portfolio: Exhibit 1 Comparison of Winthrop's Portfolio to Possible Benchmarks Winthrop Statistic Portfolio Average price-to-book ratio 1.95 Beta relative to the benchmark Median market capitalization (U.S. dollar billions) 5.60 Volatility (annual) 12.0% Tracking error relative to the benchmark Dividend yield 1.86% A. from among the three possible benchmarks presented in Exhibit 1, the highest quality benchmark for Winthrop's portfolio. Justify your recommendation with two reasons, using information provided in Exhibit 1. 2.06 1.03 7.98 18.7% 1.87% 2.45% Russell 1000 2.13 0.85 3.28 10.3% 4.72% 2.08% Russell 3000 2.09 0.92 0.59 10.4% 2.07% 1.76% Exhibit 2 Fundamental Factor Model Micro-attribution Report for Winthrop's Portfolio Asset Allocation Asset Class Net Short US Stock 0.62 Non-U.S. Stock 17.29 148 Bonds 23.12 0.83 Other 0.08 0.00 Cash 508 13.92 Not Classified 0.38 0.00 100 Exposure Sector Region Category Long Cat. Index 54.73 56 0746.63 1877 19.03 33.57 23.95 22:51 19.68 008 1.64 006 18.98 7.03 0.00 0.38 129 0.08 -100% Cyclical Energy Sensitive Sectors Funds I Category% Basic Materials 3.69 Consumer Cyclical 12.18 1225 Financial Services 1721 16.44 Real Estate 314 4.33 Communication Services 3.94 3.19 6.02 5.49 Industrials 10.17 11.13 | Technology 20.51 19.35 Consumer Defensive 6.13 7.97 Healthcare 1267 13.07 Utilities 3.98 3.08 As of Jun 30, 2019 Category: Allocation-70% to 85% Equity | Sector data is based on the rescaled long position of the equity holdings B. With the information from Exhibit 2 i. talk about the overall asset allocation ii. discuss the manager overweight and underweight which sectors and which style of a fund this could be Defensive 20 Jacob, the foundation manager, holds a company called Walk2campus. He believes that the share price of Walk2campus, a hotel operating company, will be significantly influenced by the outcome of Rock hill's bid to host a football tournament. If Rock hill is selected, she believes that share price would rise significantly. If Rock hill is not selected, she believes that the share price would fall significantly. Jacob wants to profit from her beliefs by implementing a straddle. She gathers the information shown in Exhibit 3. Exhibit 3 Walk2campus Share and Options Data Current share price of Walk2campus Annual risk-free rate Price of one month call option, exercise price USD 9.00 Price of one month put option, exercise price USD 9.00 USD 8.80 1.50% USD 0.38 USD 0.57 C. Determine each of the following: i. the profit per share on the straddle if the Rock Hill wins the bid and the share price doubles. the two share prices of Walk2eampus at which breakeven for the straddle occurs. ii. iii. Explain why each of the following option strategies is less appropriate than a straddle, given Jacob's beliefs: bull spread short butterfly spread zero cost collar Many buildings at Winthrop were build in the 1980s, and it comes to the time to remodel them. Winthrop University Foundation plans to spend four Million dollars in the next eight years. The foundation is committed to spend equally 0.5 million dollars each year in the next eight years. This goal is essential to student success and should be managed in a way with lower risk