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25. Rock Solid has a stock portfolio worth $100 million, which tracks closely with the Samp;P 500. The portfolio manager fears that a decline is
Rock Solid has a stock portfolio worth $100 million, which tracks closely with the S&P 500. The portfolio manager fears that a decline is coming therefore buys put options to protect the entire portfolio when the S&P 500 was $1,005. The strike price the manager entered into was at $1,005. Suppose after a year the S&P 500 is $954 and the portfolio is worth $95 million. The options premium is $1 million. What is the value of the total position?
So on the review sheet, the answer is highlighted. But i dont know how to do it, if you can tell me what is the formula, that will be awesome.
25. Rock Solid has a stock portfolio worth $100 million, which tracks closely with the S&P500. The portfolio manager fears that a decline is coming therefore buys put options toprotect the entire portfolio when the S&P 500 was $1,005. The strike price the managerentered into was at $1,005. Suppose after a year the S&P 500 is $954 and the portfolio isworth $95 million. The options premium is $1 million. What is the value of the totalposition? A. $100,074,627 B. $99,074,627 C. $96,029,851 D. $94,000,000