Help Ernest design a hedging strategy, employing options while not buying or selling any assets. Also, examine the fund’s portfolio strategy and assess real estate investments, valuations, and the risks to which it might be exposed.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Top-Notch Conservative Ltd is a pension fund managing the portfolios of people saving for the later years of their lives. As such, it prides itself on delivering low but reliable returns on investment, which consist of 70% of government bonds, 10% equity, and 20% real estate.Ernest Blue, its newly appointed CEO, is trying to maintain the fund’s good reputation. The high volatility of the real estate portion of the fund, however, worries him.

Help Ernest design a hedging strategy, employing options while not buying or selling any assets. Also, examine the fund’s portfolio strategy and assess real estate investments, valuations, and the risks to which it might be exposed.

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