You Have $500 000 Invested in a Property Index,which Has

question 9

Multiple Choice

You have $500 000 invested in a property index,which has a current value of 4000.00.If a put option is available with an exercise price of 3800,standard deviation of returns is 20%,time to maturity is 6 months and risk free rate is 8% p.a. ,how many contracts are required for an exact hedge of this index? Assume an index point value of $10.00.

• A) 13
• B) 3
• C) 40
• D) 50

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Definitions:

Weber's Bureaucracy

A concept developed by sociologist Max Weber that describes a structured, organized, and hierarchical form of organization, characterized by formal procedures, division of labor, and a clear hierarchy of authority.

Theory X

A management theory assuming employees are inherently lazy and will avoid work if they can, necessitating control and coercion.

Directive Relationships

Relationships characterized by one party giving instructions or directions to another within an organizational hierarchy.

Command-and-control

A management style characterized by hierarchical authority, strict discipline, and a focus on compliance and order.