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20) You own the market index. You just bought an insurance contract that, held with your
investment in the market index, promises you a minimum payoff of $1700 no matter
what. What is the expected return of this insurance contract?
a) -14.3%
b) -12.1%
c) -5.3%
d) 14.3%
25.3%

Top Answer

Expected Payoff of the market Index = 0.6*500 + 0.4*1600 = 940 Final profit =... View the full answer

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