Suppose today is July 1 and that you own the S&P 500 and the current price...

Transcribed Image Text:

Suppose today is July 1 and that you own the S&P 500 and the current price is 370. You have achieved large gains over the past six months which you would like to lock in through the end of the year. Suppose the dividend yield on the S&P 500 is 3.3%, the volatility is 15% and the interest rate is 7%. a. What is the cost of putting a 340 floor on the December 31 value of your portfolio? b. Find a call which when added to the 340 floor gives you a zero cost collar. Suppose today is July 1 and that you own the S&P 500 and the current price is 370. You have achieved large gains over the past six months which you would like to lock in through the end of the year. Suppose the dividend yield on the S&P 500 is 3.3%, the volatility is 15% and the interest rate is 7%. a. What is the cost of putting a 340 floor on the December 31 value of your portfolio? b. Find a call which when added to the 340 floor gives you a zero cost collar.

Answer rating: 100% (QA)

a The cost of putting a 340 floor on the December 31 va... View the full answer