(Mark Value = 3)

3. Consider a European put option on a stock index without dividends, with 6 months to expiration and a strike price of 1,100. Suppose that the annual nominal risk free rate is 4%, convertible semi-annually, and that the put costs 164.20 today.

Calculate the price that the index must be in 6 months so that being long in the put would produce the same profit as being short in the put.

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