PLEASE SHOW ALL WORK AND FORMULAS QUESTION 1:

You buy a 1-year put option and sell the corresponding call option. Both options are written on 1 share of IBM stock and both have an exercise price of $86. In addition, you also buy 1 share of IBM stock. What is the net payoff you receive from this 3-asset portfolio if at expiration the price of each share of IBM stock is $42?

QUESTION 2:

A European call option written on one share of Medident Corp. has the following parameter values: S = $220, X = $200, r = 5% p.a., sigma = 40% p.a., T = 9 months. Find the call option's premium, rounded to 2 decimals (e.g., 3.24). Do NOT include the $ sign in your answer; write only the numerical value. NOTE: Use the continuous time version of the Black-Scholes equation (i.e., do NOT use the book's version).

QUESTION 3:

A European PUT option written on one share of Deadwood Lumber Co. stock has the following parameter values: S = $28, X = $30, r = 5% p.a., SIGMA = 40% p.a., T = 12 months. Find the premium of this option, rounded to 2 decimals (e.g., 1.15; do NOT include a dollar sign in your answer). NOTE: Use the continuous time version of the Black-Scholes and Put-Call Parity equations (i.e., do NOT use the book's version).