1. (10 points) An investor wishes to insure farself against a decrease in the value of her stock and she makes use of a collar strately, whereby she sells a European call option and purchases a put option. Assume the following: (a) Stock prices change quarterly. (b) The options mature in six months. (c) The current stock price is 50. (d) The call option strike price is 60. (e) The put option strike price is 45. (f) Each quarter, the stock price will either increase or decrease by 20%. (g) The continuously compounded risk-free rate is 5% per annum. (h) The stock pays no dividends. Determine the incial cost of the collar. 1. (10 points) An investor wishes to insure farself against a decrease in the value of her stock and she makes use of a collar strately, whereby she sells a European call option and purchases a put option. Assume the following: (a) Stock prices change quarterly. (b) The options mature in six months. (c) The current stock price is 50. (d) The call option strike price is 60. (e) The put option strike price is 45. (f) Each quarter, the stock price will either increase or decrease by 20%. (g) The continuously compounded risk-free rate is 5% per annum. (h) The stock pays no dividends. Determine the incial cost of the collar