Question: Repeat Problem 17.17 on the assumption that the portfolio has a beta of 1.5. Assume that the dividend yield on the portfolio is 4% per

Repeat Problem 17.17 on the assumption that the has a beta of 1.5. Assume that the yield on the is 4% per annum.
a) If the fund manager buys traded European put options, how much would the insurance cost?
b) Explain carefully alternative strategies open to the fund manager involving traded European call options, and show that they lead to the same result.
c) If the fund manager decides to provide insurance by keeping part of the in risk-free securities, what should the initial position be?
d) If the fund manager decides to provide insurance by using nine-month index futures, what should the initial position be?

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