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Assume that stock index sells for $1,000 and there is no dividend payment for the index. The effective risk-free rate is 5 percent. Determine the
Assume that stock index sells for $1,000 and there is no dividend payment for the index. The effective risk-free rate is 5 percent. Determine the strategy that provides you to buy the index in for $1,025 after a year. For the hedging strategy please use both European put and call options written on the index with a strike price of $1,025. (Hint: In addition to using put and call options you may consider depositing an amount today.) (12 points) this question has to be solved on paper ( not in excel ) otherwise i will give unlike
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