1. You purchase two JAG June 50 call options for a premium of $4.66 each and one JAG June 50 put option for a premium of $4.98. What are the break-even prices of the position ignoring transaction costs? Select one: a. 42.85 and 64.30 b. 42.85 and 57.15 c. 35.70 and 64.30 d. 35.70 and 57.15 e. None of the options are correct.

2. You are in a world where there are two assets: gold and stocks. The expected return on stocks is higher than gold and the expected standard deviation is lower. Your estimate of the correlation between gold and stocks is negative -0.20. Based on these investment fundamentals, you have constructed a portfolio which is 25% invested in gold and 75% invested in stocks. You now learn that GPEC (a cartel of gold-producing countries) is going to vary the amount of gold produced depending on the price of stocks. It is going to produce less gold when the stock market is up, and it is going to produce more gold when the stock market is down. What effect will this have on the correlation between the two assets and on the weighting in your portfolio given to gold? Select one: a. The correlation increases, and the weight on gold decreases. b. The correlation increases, and the weight on gold increases. c. The correlation decreases, and the weight on gold increases. d. The correlation decreases, and the weight on gold decreases. e. The correlation is unchanged, and the weight on gold is unchanged.