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We Wish to Cap Participation in a 3-Year Equity-Linked Option

Question 17

Multiple Choice

We wish to cap participation in a 3-year equity-linked option at 50.0% return.Our profit alpha is 3.0%.The S&P 500 price = 950,div = 0.015,σ = 0.22,and interest rates are 4.8%.What is the implied participation rate?


A) 0.66
B) 0.76
C) 0.96
D) 1.16

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