Answer Questions 1 Through 6 About Insuring a Portfolio Identical

question 46

Multiple Choice

Answer questions 1 through 6 about insuring a portfolio identical to the S&P 500 worth $12,500,000 with a three-month horizon. The risk-free rate is 7 percent. Three-month T-bills are available at a price of $98.64 per $100 face value. The S&P 500 is at 385. Puts with an exercise price of 390 are available at a price of 13. Calls with an exercise price of 390 are available at a price of 13.125. Round off your answers to the nearest integer.
-How many puts should be used to insure this portfolio?

• A)122,584
• B)31,397
• C)62,814
• D)961,538
• E)32,468

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Definitions:

Elaborative Rehearsal

A memory technique that involves thinking about the meaning of the information and connecting it to other knowledge the person has, to better retain the information.

Tip-Of-The-Tongue Effect

A cognitive phenomenon where a person cannot fully retrieve a word or name but has a partial recall or feels that retrieval is imminent.

Encoding Failure

The inability to recall specific information because it was not encoded into memory effectively.

Acoustic Storage

The part of memory that holds audio information for a brief period following hearing it.