Answer Questions 1 Through 6 About Insuring a Portfolio Identical

question 55

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.
-What is the minimum value of the insured portfolio?

• A)$16,672,344
• B)$12,500,000
• C)$12,091,709
• D)$12,244,898
• E)$13,375,000

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Definitions:

Basic Trust

A term coined by psychologist Erik Erikson describing the first stage of psychological development wherein a child learns whether the world is trustworthy and safe.

Erikson

A psychologist known for his theory on the psychosocial development of human beings.

Virtue

A trait or quality deemed to be morally good and thus is valued as a foundation of principle and good moral being.

Surrogate Mothers

Women who carry and deliver a baby on behalf of another person or couple, often involving a legal or informal agreement.