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

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Your client is invested in a registered indexed-linked annuity (RILA). The RILA contains a 7% floor, an 80% participation rate, and an overall cap rate of 10%. Suppose in years one and two, the S&P 500 returns 12% and -10%, respectively. What interest rate would be credited to the RILA during these two years? A) Year 1: 10% / Year 2: -7% B) Year 1: 9.6% / Year 2: -7% C) Year 1: 9.6% / Year 2: -3% D) Year 1: 9.6% / Year 2: -10%
Assume that you have $10,000,000 in your bank account. You wish to withdraw $400,000 per year, at the end of each year, for the next 5 years, after which you wish to have $11,000,000 in the bank. What is the balance in your account after the 2nd year (after the withdrawal)? Hint: you will need first to solve for rate in Excel given all other parameters. Watch signs. Select one: a. $10,366,644 b. $10,600,000 c. $9,600,000 d. $10,488,912
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