Consider a Portfolio Which Uses an European Index as the Underlying

question 18

Multiple Choice

Consider a portfolio which uses an European index as the underlying asset.The pay offs of the underlying asset in the up node and down node is 1,390 and 1,330 respectively.If the risk-free rate is 3.5% and the pay-offs of structured bond in the up node and down nodes are €214.50 and €169.50 respectively.Calculate the amount of money invested in a risk-free security.

• A)+€900
• B)-€850
• C)-€800
• D)+€950

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