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1. You buy a 1-year put option and sell the corresponding call option. Both options are written on 1 share of IBM stock and both have an exercise price of $99. In addition, you also buy 1 share of IBM stock. What is the net payoff you receive from this 3-asset portfolio if at expiration the price of each share of IBM stock is $42?

2. A European PUT option written on one share of Deadwood Lumber Co. stock has the following parameter values: S = $28, X = $30, r = 5% p.a., sigma = 20% p.a., T = 9 months. Find the premium of this option, rounded to 2 decimals.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92744234

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