Question You are a provider of portfolio insurance and are establishing a four-year program. The portfolio you manage is currently worth $120million, and you promise to provide a minimum return of 0%. The equity portfolio has a standard deviation of 25% per year, and T-billspay 4.8% per year. Assume that the portfolio pays no dividends.b-1. Calculate the put delta and the amount held in bills if the stock portfolio falls by 3% on the first day of trading, before the hedge isin place? (Input the value as a positive value. Do not round intermediate calculations. Round your answers to 2 decimal places.)Answer is complete but not entirely correct.Put deltaAmount held in bills28.33$ 44.00 millionb-2. What action should the manager take? (Enter your answer in millions rounded to 2 decimal places. Do not round intermediatecalculations.)The manager mustsell36.30Answer is complete but not entirely correct.millionofequityand use the proceeds tobuy bills

Delta of a put option The change in the option's premium or price as a result of the change in the…

You are a provider of portfolio insurance and are establishing a four-year program. The portfolio you manage is currently worth $120 million, and you promise to provide a minimum return of 0%. The equity portfolio has a standard deviation of 25% per year, and T-bills pay 4.8% per year. Assume that the portfolio pays no dividends. b-1. Calculate the put delta and the amount held in bills if the stock portfolio falls by 3% on the first day of trading, before the hedge in place? (Input the value as a positive value. Do not round intermediate calculations. Round your answers to 2 decimal places.) Answer is complete but not entirely correct. % million Put delta Amount held in bills 28.33 $ 44.00 b-2. What action should the manager take? (Enter your answer in millions rounded to 2 decimal places. Do not round intermediate calculations.) The manager must sell 36.30 Answer is complete but not entirely correct. million of and use the proceeds to equity buy bills

You are a provider of portfolio insurance and are establishing a four-year program. The portfolio you manage is currently worth $120 million, and you promise to provide a minimum return of 0%. The equity portfolio has a standard deviation of 25% per year, and T-bills pay 4.8% per year. Assume that the portfolio pays no dividends. b-1. Calculate the put delta and the amount held in bills if the stock portfolio falls by 3% on the first day of trading, before the hedge in place? (Input the value as a positive value. Do not round intermediate calculations. Round your answers to 2 decimal places.) Answer is complete but not entirely correct. % million Put delta Amount held in bills 28.33 $ 44.00 b-2. What action should the manager take? (Enter your answer in millions rounded to 2 decimal places. Do not round intermediate calculations.) The manager must sell 36.30 Answer is complete but not entirely correct. million of and use the proceeds to equity buy bills

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter12: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 1FPE: What makes for a good investment? Use the approximate yield formula or a financial calculator to...

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You currently have $300,000. You want to invest it in the following three assets: 10-year US Treasury bond with coupon rate 3.8%, Blandy and Gourmange stocks below: (See table attached) Your goal is to have the expected return of 6.8% with a minimum portfolio risk. How much money should you allocate to these three assets?