You are a provider of portfolio insurance and are establishing a 4-year program. The portfolio you manage is worth $105 million, and you hope to provide a minimum return of 0%. The equity portfolio has a standard deviation of 24% per year, and T-bills pay 3% per year. Assume that the portfolio pays no dividends. a-1. How much should be placed in bills? (Enter your answer in millions rounded to 2 decimal places.) T-bills a-2. How much in equity? (Enter your answer in millions rounded to 2 decimal places.) Portfolio in equity million Delta of the portfolio million b-1. What is the delta if the new portfolio falls by 6% on the first day of trading? (Negative value should be indicated by a minus sign. Enter your answer in millions rounded to 4 decimal places.)

You are a provider of portfolio insurance and are establishing a 4-year program. The portfolio you manage is worth $105 million, and you hope to provide a minimum return of 0%. The equity portfolio has a standard deviation of 24% per year, and T-bills pay 3% per year. Assume that the portfolio pays no dividends. a-1. How much should be placed in bills? (Enter your answer in millions rounded to 2 decimal places.) T-bills a-2. How much in equity? (Enter your answer in millions rounded to 2 decimal places.) Portfolio in equity million Delta of the portfolio million b-1. What is the delta if the new portfolio falls by 6% on the first day of trading? (Negative value should be indicated by a minus sign. Enter your answer in millions rounded to 4 decimal places.)

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

Section: Chapter Questions

Problem 1PS

See similar textbooks

Related questions

Q: Define revenue bonds

A: Answer: A revenue bond is also regarded as a municipal bond that is sponsored by specific individual…

Q: A corporation is considering the purchase of an interest in real estate syndication at a price of…

A: Calculation of expected IRR compounded monthly, total cash paid and profit: Answer: Monthly required…

Q: fferent ty

A: Define interest. In finance, or economics interest can be defined as the payment of a proportion…

Q: Write the methods of Calculating Interest?

A: Methods of calculating interest: The basic and fundamental methods for calculating interests are…

Q: Explain principal (debt)

A: Debt is the amount owed by the company for a particular period from the date of the company's…

Q: Explain payment-in-kind (PIK) bonds

A: A financial instrument that does not affect the ownership of the common shareholders or management…

Q: Explain required rate of return on debt

A: Debt is some amount of money owed by a borrower to the creditor. Debt can be two types. One is…

Q: A tax credit of $100 for a person in a 28 percent tax bracket would reduce a person's taxes by…

A: Solution Note : Dear student as per the Q&A guideline we are required to answer the first…

Q: Define embedded rate (for debt)

A: An embedded option is the component of financial security the gives the issuer of the debt option or…

Question

Pp.5.

Subject:- Finance

You are a provider of portfolio insurance and are establishing a 4-year program. The portfolio you manage is
worth $105 million, and you hope to provide a minimum return of 0%. The equity portfolio has a standard
deviation of 24% per year, and T-bills pay 3% per year. Assume that the portfolio pays no dividends.
a-1. How much should be placed in bills? (Enter your answer in millions rounded to 2 decimal places.)
T-bills
a-2. How much in equity? (Enter your answer in millions rounded to 2 decimal places.)
Portfolio in equity
million
Delta of the portfolio
million
b-1. What is the delta if the new portfolio falls by 6% on the first day of trading? (Negative value should be
indicated by a minus sign. Enter your answer in millions rounded to 4 decimal places.)
b-2. Complete the following: (Enter your answer in millions rounded to 4 decimal places.)
Assuming the portfolio does fall by 6%, the manager should
sell
$
4.6338 in stock.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: a-1 portfolio allocation

VIEW

Step 2: a-2 Portfolio management

VIEW

Step 3: b-1 Portfolio delta calculation

VIEW

Step 4: b-2 Portfolio

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 5 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

You have an investment opportunity that promises to pay you $12,979 in four years. Suppose the opportunity requires you to invest $9,540 today. What is the interest rate you would earn on this investment? Note: Use tables, Excel, or a financial calculator. Do not round your intermediate values. Enter your answer rounded to the nearest whole percentage. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Solve for i Present Value: n = i = Future Value:
You have a chance to buy an annuity that pays $25,000 at the beginning of each year for 10 years. You could earn 8.5% on your money in other investments with equal risk. What is the most you should pay for the annuity? You are not required to show calculations but you must list the inputs used such as N, PV, FV, etc. O $346,484.41 O $177,976.57 O $164,033.70
Suppose an investment will pay $7,000 in 44 years from now. If you can earn 6.15% interest compounded monthly by depositing your money in a bank, how much should you pay for the investment today?Round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is .05718 or 5.718% round as 5.72. Group of answer choices
Suppose you want to borrow $90,000 and you find a bank offering a 20-year loan with an APR of 5%. a. Find your regular payments if you pay n = 1, 12, 26, 52 times a year. b. Compute the total payout for each of the loans in part (a). c. Compare the total payouts computed in part (b). a. The payment for n = 1 would be $ The payment for n = 12 would be $ The payment for n = 26 would be $ The payment for n= 52 would be $ (Do not round until the final answer. Then round to the nearest cent as needed.)
You find a mutual fund that offers approximately 6% APR compounded monthly. You will invest enough each month so that you will have $1000 at the end of the year. How much money will you have invested in total after 1 year? O A. $711.32 B. $994.60 O C. $912.86 O D. $972.84
You invest $9000 in an account that pays simple interest of 2% for 13 years. What is the interest you will have at the end of the indicated period?
Assume you make a deposit of $7,500 now into a saving account that pays 12% per year, compounded quarterly. If you want to know the total amount after 2 years, the value of interest rate (i) you should use in the F/P factor is: Select one: а. 3% b. 4 % с. 24% d. 12 %
A new investment opportunity for you is an annuity that pays $650 at the beginning of each year for 3 years. You could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity? Select the correct answer. a. $1,903.81 b. $1,885.91 c. $1,850.11 d. $1,832.21 e. $1,868.01
Suppose an investment will pay $11,000 in 41 years from now. If you can earn 14.55% interest compounded monthly by depositing your money in a bank, how much should you pay for the investment today?Round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is .05718 or 5.718% round as 5.72. A. $31.59 B. $31.30 C. $26.04 D. $25.74 E. $29.25
Curly's Life Insurance Co. is trying to sell you an investment policy that will pay you and your heirs $25,000 per year forever. Assume the required return on this investment is 6 percent. Required: How much will you pay for the policy? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Policy value today
Your friend told you about an NFT (Non-fungible Token) that they think will be worth $842 in 7 years. If your required return on investments of this risk is 13.2%, what is the most you should be willing to pay for it today? Round to 2 decimal places. Include a dollar sign ($) or percent (%) as appropriate. Answer:
Suppose you want to borrow $90,000 and you find a bank offering a 20-year term for a loan of that amount, with an APR of 7%. Complete parts (a) and (b) below. (a) What are your monthly payments? PMT=$ (Round to the nearest cent as needed.) Question

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS