1) The common stock of Company XYZ is currently trading at a price of $72. Both a put and a call option are available for XYZ stock, each having an exercise price of $70 and an expiration date in exactly six months.

The current market prices for the put and call are $1.75 and $3.60, respectively. The risk-free holding period return for the next six months is 6 percent, which corresponds to an 8 percent annual rate.

a. For each possible stock price in the following sequence, calculate the expiration date payoffs (net of the initial purchase price) for the following positions:

(1) buy one XYZ call option, and,

(2) short one XYZ call option

For the XYZ stock prices of 50, 55, 60, 65, 70, 75, 80, 85, 90

Draw a graph of these payoff relationships, using net profit on the vertical axis and potential expiration date stock price on the horizontal axis. Be sure to specify the prices at which these respective positions will break even (produce a net profit of zero).

Questions 2:

Assuming that a one-year call option with an exercise price of $38 is available for the stock of the ABC Corp., consider the possibility of the stock price to move +/- 10% per period, draw a binomial model labelling important criterias such as the expected stock price, the payoff, hedge ratio and option prices. Take note that the current share price is $40 and Rfr is 5% per annum.

Question 3: An investor buys a European put on a share for $3. The stock price is $82 and the strike price is $80. Under what circumstances does the investor make a profit?

i)Under what circumstances will the option be exercised?

ii)Draw a diagram showing the variation of the investor's profit with the stock price at the maturity of the option.

Question 4

Consider an option on a non-dividend-paying stock when the stock price is $50, the exercise price is $49, the risk-free interest rate is 5% per annum, the volatility is 25% per annum, and the time to maturity is four months.

a.What is the price of the option if it is a European call?

b.What is the price of the option if it is a European put?

Question 5

How to protecting Portfolio value with put options?

Question 6

What is the language and structure of Forward and Future Markets?