Fit Width Question 6 (a). Find the portfolid II if William: i. buys two call options with the strike price K and short sell one share. ii. buys one call option C with strike K and sell one put P with strike price K2. N (b). Find the portfolio II if Oliver: i. buys three put options(P) and two call options (C) with the strike price K and K2 respec- tively and short sell three shares. ii. short sell one share, buy two puts and sells three call options with strike K and K respec- tively. (a). Consider a 10-month forward contract on a stock when the stock price is GH60. Assume that the risk-free interest rate (continuously compounded) is 6% per annum for all maturities. Assume that dividends of GH0.95 per share are expected in 3 months, 6 months and 9 months. What is the forward price (b). Suppose that the risk-free rate is 8%. However, as a small investor, you can invest money at 7% only and borrow at 10%. Does either of the classical strategies give an arbitrage profit if F (0, 1) GH89 and S(0) = GH83, and a GH2 dividend is paid in the middle of the year? (c). Consider a 6-month forward contract on a stock when the stock price is GH25. Assume that the risk-free interest rate (continuously compounded) is 10% per annum. Assume that the yield is 4% per annum with semiannual compounding. What is the forward price? Question 1 (a). An exporting conlpany, which produces a machine in US, has agreed (for e.g., on 30th January 2017) to sell this machine upon completion to a client in the Ghana at a fixed GHS amount (for e.g., 1million GHS) and at a fixed date (e.g., 30th March 2018). Assume that the production costs of this machine will mainly incur in US. The company is therefore exposed to currency exchange rate risk (due to currency fluctuation) between the time of production and the time of the sale. 30th January 2017 30th March 2018 GHS/USD=4.6800 GHS/USD 4.2000 Will the company loose or gain? What can then be done to reduce/increase any substantial losses/gains?