Portfolio Managers Paul Martin and Kevin Krueger Each Manage $1,000,000

question 15

Multiple Choice

Portfolio managers Paul Martin and Kevin Krueger each manage $1,000,000 funds.Paul Martin has perfect foresight and the call option value of his perfect foresight is $150,000.Kevin Krueger is an imperfect forecaster and correctly predicts 50% of all bull markets and 70% of all bear markets.The value of Kevin Krueger's imperfect forecasting ability is __________.

• A) $30,000
• B) $67,500
• C) $108,750
• D) $217,500

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