You are faced with the probability distribution of the HPR on the stock market index fund...

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You are faced with the probability distribution of the HPR on the stock market index fund given in Spreadsheet 5.1 of the text. Suppose the price of a put option on a share of the index fund with exercise price of $110 and time to expiration of 1 year is $12, and suppose the risk-free interest rate is 6% per year. You are contemplating investing $107.55 in a 1-year CD and simultaneously buying a call option on the stock market index fund with an exercise price of $110 and expiration of 1 year. What is the probability distribution of your dollar return at the end of the year? (Round your answers to 2 decimal places.) You are faced with the probability distribution of the HPR on the stock market index fund given in Spreadsheet 5.1 of the text. Suppose the price of a put option on a share of the index fund with exercise price of $110 and time to expiration of 1 year is $12, and suppose the risk-free interest rate is 6% per year. You are contemplating investing $107.55 in a 1-year CD and simultaneously buying a call option on the stock market index fund with an exercise price of $110 and expiration of 1 year. What is the probability distribution of your dollar return at the end of the year? (Round your answers to 2 decimal places.) State of the Economy Excellent Good Poor Crash 1234 Purchase Price = 5 6 State of the 7 Economy B 8 Boom 9 Normal growth 10 Mild recession Probability 11 Severe recession 12 Expected Value (mean) 13 Varlance of HPR 14 Standard Deviation of HPR 0.25 0.45 0.25 0.05 Probability 0.25 0.45 0.25 0.05 $100 Year-End Price 126.50 110.00 89.75 46.00 15 Risk Premium 16 Standard Deviation of Excess Return Ending Value of CD D Cash Dividends 4.50 E SUMPRODUCT(B8:B11, E8:E11) = 0.0976 Ending Value of Call Spreadsheet 5.1 Scenario analysis of holding-period return of the mutual fund F Deviations from Mean HPR 0.3100 0.2124 4.00 0.1400 0.0424 3.50 -0.0675 -0.1651 2.00 -0.5200 -0.6176 T-Bill Rate = SUMPRODUCT(B8:B11, G8:G11)= SQRT(G13) = G 0.04 Squared Deviations H Combined Value 0.0380 0.1949 SUMPRODUCT(B8:B11, H8:H11) = Excess Returns 0.2700 from Mean 0.0451 0.0018 0.1000 0.0273 -0.1075 0.3815 -0.5600 0.0576 _ SORT|SUMPRODUCT(B8:B11, 18:111}} = Squared Deviations from Mean 0.0451 0.0018 0.0273 0.3815 0.1949 You are faced with the probability distribution of the HPR on the stock market index fund given in Spreadsheet 5.1 of the text. Suppose the price of a put option on a share of the index fund with exercise price of $110 and time to expiration of 1 year is $12, and suppose the risk-free interest rate is 6% per year. You are contemplating investing $107.55 in a 1-year CD and simultaneously buying a call option on the stock market index fund with an exercise price of $110 and expiration of 1 year. What is the probability distribution of your dollar return at the end of the year? (Round your answers to 2 decimal places.) You are faced with the probability distribution of the HPR on the stock market index fund given in Spreadsheet 5.1 of the text. Suppose the price of a put option on a share of the index fund with exercise price of $110 and time to expiration of 1 year is $12, and suppose the risk-free interest rate is 6% per year. You are contemplating investing $107.55 in a 1-year CD and simultaneously buying a call option on the stock market index fund with an exercise price of $110 and expiration of 1 year. What is the probability distribution of your dollar return at the end of the year? (Round your answers to 2 decimal places.) State of the Economy Excellent Good Poor Crash 1234 Purchase Price = 5 6 State of the 7 Economy B 8 Boom 9 Normal growth 10 Mild recession Probability 11 Severe recession 12 Expected Value (mean) 13 Varlance of HPR 14 Standard Deviation of HPR 0.25 0.45 0.25 0.05 Probability 0.25 0.45 0.25 0.05 $100 Year-End Price 126.50 110.00 89.75 46.00 15 Risk Premium 16 Standard Deviation of Excess Return Ending Value of CD D Cash Dividends 4.50 E SUMPRODUCT(B8:B11, E8:E11) = 0.0976 Ending Value of Call Spreadsheet 5.1 Scenario analysis of holding-period return of the mutual fund F Deviations from Mean HPR 0.3100 0.2124 4.00 0.1400 0.0424 3.50 -0.0675 -0.1651 2.00 -0.5200 -0.6176 T-Bill Rate = SUMPRODUCT(B8:B11, G8:G11)= SQRT(G13) = G 0.04 Squared Deviations H Combined Value 0.0380 0.1949 SUMPRODUCT(B8:B11, H8:H11) = Excess Returns 0.2700 from Mean 0.0451 0.0018 0.1000 0.0273 -0.1075 0.3815 -0.5600 0.0576 _ SORT|SUMPRODUCT(B8:B11, 18:111}} = Squared Deviations from Mean 0.0451 0.0018 0.0273 0.3815 0.1949

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