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Note: for this homework feel free to use Excel. 1. Your client wants to protect...

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Finance

Note: for this homework feel free to use Excel. 1. Your client wants to protect their principal of $84,200 yet have upside participation in case the S&P 500 Index appreciates over the next 12 months. You suggest a strategy where 80,200 is invested in a zero-coupon 1-year government bond yielding 5% per year, and $4,000 is invested in an at the money call option in the SPY (SPDR S&P 500 ETF Trust). The price of the SPY is 392 and a 12-month at the money call option sells for 40. Construct a graph that shows the value of this portfolio on the Y-axis against the SPY price on the X-axis (start at a price of 310 and go up in increments of 5 until you get to 535).

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