1.

1. A call option on a non-dividend-paying stock has a strike price of $40 and a time to maturity of three months. The risk-free rate is 5% and the volatility is 30%. The stock price is $37. What is the delta of the option?
   1. N(-0.1342)
   2. N(-0.3617)
   3. N(-0.2034)
   4. N(-0.2241)
2. A stock fund portfolio manager in charge of a portfolio worth $100 million is concerned that the market might decline rapidly during the next three months and would like to use put options on the stock index to provide protection against the portfolio falling below $90 million. The index is currently standing at 800 points and each contract is on 100 times the index. What should the strike price of put option on the index be if the portfolio has a beta of 1?
3. 1. 800
   2. 720
   3. 600
   4. 620