A Portfolio Manager in Charge of a Portfolio Worth $10

question 17

Multiple Choice

A portfolio manager in charge of a portfolio worth $10 million is concerned that the market might decline rapidly during the next six months and would like to use put options on an index to provide protection against the portfolio falling below $9.5 million.The index is currently standing at 500 and each contract is on 100 times the index.What should the strike price of options on the index be the portfolio has a beta of 1?

• A) 425
• B) 450
• C) 475
• D) 500

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Definitions:

Unconditioned Response

A natural, unlearned reaction to an unconditioned stimulus, part of classical conditioning theory.

Unconditional Reinforcement

A form of reinforcement in operant conditioning that is given consistently every time a desired response is made.

Unconditioned Response

An automatic, natural reaction to a stimulus that does not depend on prior learning.

Meat Powder

A processed product made from dried and powdered meat, used as a flavoring or nutritional supplement.