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

Appreciate the empirical nature of psychology and its methodological diversity.

Understand the principles of language and its role in cognitive processes.

Learn about the psychology of problem-solving, including barriers and effective strategies.

Recognize the role of evolutionary perspectives in understanding human behavior and cognition.

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Definitions:

Capital Account

An account on the balance sheet representing the cumulative amount of the company's earnings, investment, or losses.

Income Summary

An account in the ledger used to summarize revenues and expenses for a period, helping to determine the net income or loss.

Income Summary Account

A temporary ledger account used to summarize a period’s revenues and expenses before transferring the net result to the company's equity account(s).

Net Income

Net income is the total earnings of a company after subtracting all expenses, including taxes, interest, and operating expenses, from its total revenues.