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(c.) You are asked to structure a 1 year guaranteed bond which repays at least 100 (i.e. the initial investment of the retail investor

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(c.) You are asked to structure a 1 year guaranteed bond which repays at least 100 (i.e. the initial investment of the retail investor - excluding fees). 1 years interest rate are 2% and options with an expiry of 1 year cost 6.15 (put) and 8.13 (Call). The strike price of the call and put options is 100. Show how you would structure this guaranteed bond if the current stock price is 100 and expected stock prices next year are either 82 or 118. What fee would you have to charge for this product so that you are going to break even. [35 marks]

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