Question
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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