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He premium on a call option on the market index
$ 20.00

1. The premium on a call option on the market index with an exercise price of $50 is $1.30 when originally purchased. After three months the position is closed and the index spot price is $52. If interest rates are 0.75% per month, what is the call profit?

2. The S&P Index price is 1925.28 and its annualized dividend yield is 2.40%. LIBOR is 3%. How many futures contracts will you need to hedge a $25 million portfolio with a beta of 1.9 for one year? Show your work!

3. The S&P 500 index price is 1492.28 and its annualized dividend yield is 2.30%. LIBOR is .2%. How many futures contracts will you need to hedge a $240 million portfolio with a beta of 1.16 for one year? (Show your work)

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