Question

Suppose Fund A invested $2,800,000 in an S&P500 fund on May 13, when the index value was 2800. Fund B made the same S&P 500 investment ($2,800,000) on May 13, but it also paid $43,100 to take a long position on the put option with strike price 2600 and maturity June 12. That is, the put option premium was $43.1 per share, and Fund B purchased ten contracts because one options contract has 100 shares. Fund C made the same S&P 500 investment ($2,800,000) onMay 13, but it received $20,400 by selling a call option with strike price 3000 and maturity June 12. That is, the call premium was $20.40 per share, and Fund C sold ten contracts because one options contract has 100 shares. For simplicity, ignore dividends, transaction costs such as brokerage fees and fund management fees, and taxes. Round your final answers to two decimal places.

1) If the index becomes 2680 on June 12, what is the return of Fund A? Answer: ______% Show your calculation here to earn full credit.

2) If the index becomes 2680 on June 12, what is the return of Fund B? Answer: ______% Show your calculation here to earn full credit.

3-If the index becomes 2680 on June 12, what is the return of Fund C?

Answer: ______%

Answer 1