2. Forward and Call-Put Parity The future price of a forward contract for one ounce of platinum, with a delivery in one year is $1,800. You also collected information on a series of options. All option maturities are one year and the underlying asset is one ounce of platinum. The term structure of interest rates is flat. (a) Using the information above, find (i) the one-year risk-free interest rate and (ii) the current (spot) price of one ounce of platinum? (b) What is the price of a European Call option with a strike price of $1,920 per ounce of platinum? (c) What happens to the price of all four options - calls and puts with a strike price of $1,650 and $1,920 - if the price of platinum falls to zero, and remains there until maturity? 2 (d) Four years ago, you entered a short position in a five year forward contract for one ounce of platinum for a future price of $1,700. You would like a trader to close your position today (i.e., cancel your short position), how much would you have to pay? 2. Forward and Call-Put Parity The future price of a forward contract for one ounce of platinum, with a delivery in one year is $1,800. You also collected information on a series of options. All option maturities are one year and the underlying asset is one ounce of platinum. The term structure of interest rates is flat. (a) Using the information above, find (i) the one-year risk-free interest rate and (ii) the current (spot) price of one ounce of platinum? (b) What is the price of a European Call option with a strike price of $1,920 per ounce of platinum? (c) What happens to the price of all four options - calls and puts with a strike price of $1,650 and $1,920 - if the price of platinum falls to zero, and remains there until maturity? 2 (d) Four years ago, you entered a short position in a five year forward contract for one ounce of platinum for a future price of $1,700. You would like a trader to close your position today (i.e., cancel your short position), how much would you have to pay