question archive You want to create a new ?nancial security to sell so that you can retire early
You want to create a new ?nancial security to sell so that you can retire early
Subject:FinancePrice: Bought3
You want to create a new ?nancial security to sell so that you can retire early. This new security will pay 30% of the increase (if any) in the S&P 500 index over the next one year and assures that the investor has a guaranteed minimum dollar payoff of $500,000 at the end of the one year. What ?nancial securities could you use to create exactly the payoffs needed to honor the contract to the investor in your new security? (9 Buy a one year zero coupon bond with a face value of $500,000 and buy call options on $150,000 of the S&P 500 index. 0 Buy a put option with an exercise price of $500,000 on the S&P 500 index and a one year zero coupon bond with a face value of $500,000. O Buy $500,000 of the S&P 500 index and a put option with an exercise price of $500,000 on the S&P 500 index. O Buy $150,000 of the S&P 500 index.
