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For the next few questions, use the following information: For the following problems assume the effective 6-month interest rate is 2%, the S&R 6-month forward

For the next few questions, use the following information:

For the following problems assume the effective 6-month interest rate is 2%, the S&R 6-month forward price is $1020, and use these premiums for S&R options with 6 months to expiration:

Strike Call Put
950 120.405 51.777
1000 93.809 74.201
1020 84.47 84.47
1050 71.802 101.214
1107 51.873 137.167

1. How would you create a box spread with a certain payoff of $50?

- Buy a call and sell a put both with a strike price of $1000 while simultaneously buying a put and selling a call with a strike price of $1050?

- Buy a call and sell a put both with a strike price of $950 while simultaneously buying a put and selling a call with a strike price of $1050

- Buy a call and sell a put both with a strike price of $1000 while simultaneously buying a put and selling a call with a strike price of $1020

- Buy a put and sell a call both with a strike price of $1000 while simultaneously buying a call and selling a put with a strike price of $1050

2. What should it cost to implement the strategy from the previous question?

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