1. A mutual fund. It earns +18%, 10%, +7%, 15%, 0% in successive years. What is the investors overall return for the five years? What is his arithmetic return?

2. Consider a 9 month European Call option on a stock index. The current value of the index is $ 800, the strike price is $ 950, the risk-free rate is 3%, dividend yield = 3%, and the stock volatility has been estimated to be 15%. Compute the value of the option. Hint: Use RMFI software provided. Use Black-Scholes-Merton computation model.

Consider the same stock, but now it is a 9 month European Put option on the index. The current value of the index is $ 800, the strike price is $ 750, the risk-free rate is 3%, dividend yield = 3%, and the stock volatility has been estimated to be 15%. Compute the value of the option. Hint: Use RMFI software provided.