a) A company which had experienced a serious hit during the currency crisis appears headed for imminent failure. The company has approached the government for a financial assistance. If the firm receives the assistance, the stock price is likely to increase substantially; otherwise a huge fall in stock price is likely. Based on the information below, outline two appropriate option strategies. Show both of your strategies in a table and diagram respectively. The stock is currently trading at RM7.00.

90-days calls	90-days puts
7.00 call @ 0.26	7.00 puts @ 0.18
7.5 call @ 0.09	7.5 puts @ 0.34

b) A company current stock price at RM16.00, the exercise price at RM17.00. If government bond yield is 10%, and the companys share prices volatile at 35% in annualised form. The company does not pay any dividend. Using the Black- Scholes option pricing model, calculate:

(i) the fair value for a RM17.00 call option with 90 days to maturity. (ii) the fair value for a RM17.00 put option with 90 days to maturity.