Question 2 (answer all parts of the question) a. Use the following table of K&S stock index option contract values and strike prices for all parts of this question. All options mature in six months. Risk free rate is 2% per annum with semi-annual compounding. ii Required (show all step-by-step calculations for each part): i. Construct a butterfly spread where Kz = 0.5(K1 + ks) using puts. Show that the cost of this butterfly spread either using puts or calls is the same iii. Draw the payoff table for different values of K&S index if the butterfly spread is created using puts. iv. Draw profit diagram for different values of K&S index if the butterfly spread is created using puts. Strike ($) Call ($) 950 60.2025 1000 46.9045 1050 35.901 Put ($) 25.8885 37.1005 50.607 [12+13 + 30 + 20 = 75 marks] b. Differentiate between futures and forward contracts. (maximum word count: 200) [25 marks) Total [75 + 25 = 100 marks] Question 2 (answer all parts of the question) a. Use the following table of K&S stock index option contract values and strike prices for all parts of this question. All options mature in six months. Risk free rate is 2% per annum with semi-annual compounding. ii Required (show all step-by-step calculations for each part): i. Construct a butterfly spread where Kz = 0.5(K1 + ks) using puts. Show that the cost of this butterfly spread either using puts or calls is the same iii. Draw the payoff table for different values of K&S index if the butterfly spread is created using puts. iv. Draw profit diagram for different values of K&S index if the butterfly spread is created using puts. Strike ($) Call ($) 950 60.2025 1000 46.9045 1050 35.901 Put ($) 25.8885 37.1005 50.607 [12+13 + 30 + 20 = 75 marks] b. Differentiate between futures and forward contracts. (maximum word count: 200) [25 marks) Total [75 + 25 = 100 marks]