amywliang
June 17th 2008, 02:36 PM
Could someone explain to me the soultion how did he get 24,000 put options?
The question is that an investor currently has a holding of stock XYZ, consisting of 20,000 shares, worth $100,000 in total. She wishes to ensure that the value of her portfolio in 6 months’ time will not be less than the value it would have had if she had switched her entire portfolio to cash immediately. The continuously-compounded annualized interest rate on the cash for the next 6 months is 4%. Assuming that there are no transaction costs, which of the following strategies would achieve her objective?
Here is what I don’t understand. The solution says that there are 24,000 put options (Strike $5.00). How did he get 24,000 put options?
Thank you
The question is that an investor currently has a holding of stock XYZ, consisting of 20,000 shares, worth $100,000 in total. She wishes to ensure that the value of her portfolio in 6 months’ time will not be less than the value it would have had if she had switched her entire portfolio to cash immediately. The continuously-compounded annualized interest rate on the cash for the next 6 months is 4%. Assuming that there are no transaction costs, which of the following strategies would achieve her objective?
Here is what I don’t understand. The solution says that there are 24,000 put options (Strike $5.00). How did he get 24,000 put options?
Thank you