QUESTION 3 (25 MARKS) (a) A 3-month call option on a commodity with a strike price of $40 costs $5; a 3-month put option on the commodity with a strike price of $40 costs $6. Suppose that an investor buys two call options and one put option. Determine the breakeven stock price above which the investor makes a profit. [5] (b) (c) Use the Put-Call-Parity to derive a general equation for strike-price of an option. Suppose that the effective interest rate for 3-month is 3.5%, the NASDAQ 3-month forward price is $1050, and the premiums for S&P 3-month call and put options are $99.30 and $50.20 respectively. Determine the strike price using the above information. [8] Suppose that the effective interest rate for 3-month is 2%, the NASDAQ 3-month forward price is $1020, and the premiums for S&P 3-month call and put options are $120.405 and $51.777 respectively. If you buy a 950-strike call, sell a 950-strike put and lending $950.98, what is the payoff and profit of this portfolio in general? You answer must include the S&P stock price at expiration (ST) greater or equivalent (Sr>K) or smaller (S: