1. Stock ABC is currently trading at $75.32 per share. We are looking at 1-year options with a strike price of $78.00. If the volatility is 34%, and the risk-free rate is 3.20%, according to BlackScholes: a) What should the call price be? b) What should the put price be? c) What is the hedge ratio? d) Approximately, how many short calls would hedge 100 shares of stock (round to nearest whole number)?

2. If you are long a stock but are concerned it might drop in value, what is your best option strategy to hedge a potential price decline?

3. If you own shares of a stock in a company that makes electric tanks. The company has put out a bid for a government contract. You believe they are 80% likely to get the bid, but if they don’t get the bid, the stock’s price will drop significantly. What is the best option strategy that you can use to profit if they get the bid (which is more likely) or if they lose the bid? Given the following information on a DISH Network convertible bond, calculate the time to payback (or breakeven). Note: The bond’s price is 73.455 percent of par. DISH stock does not pay dividends