Business, 13.12.2019 20:31 ridzrana02

Imagine you are a provider of portfolio insurance. you are establishing a four-year program. the portfolio you manage is currently worth $80 million, and you promise to provide a minimum return of 0%. the equity portfolio has a standard deviation of 25% per year, and t-bills pay 7.2% per year. assume for simplicity that the portfolio pays no dividends (or that all dividends are reinvested).

a-1. what percentage of the portfolio should be placed in bills? (input the value as a positive value. round your answer to 2 decimal places.) portfolio in bills %
a-2. what percentage of the portfolio should be placed in equity? (input the value as a positive value. round your answer to 2 decimal places.) portfolio in equity %
b-1. calculate the put delta and the amount held in bills if the stock portfolio falls by 3% on the first day of trading, before the hedge is in place? (input the value as a positive value. do not round intermediate calculations. round your answers to 2 decimal places.)
b-2. what action should the manager take?

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