Rachel is considering an investment in Yonan Communications, whose stock currently sells for $55. A put option on Yonan's stock, with an exercise price of $50, has a market value of $2.85. Meanwhile, a call option on the stock with the same exercise price and time until expiration has a market value of $9.19. The market believes that at the expiration of the options, the stock price will be $40 or $70 with equal probability.

1. What is the premium associated with the put option? The call option? Round your answers to the nearest cent.

   The premium associated with the put option: $

   The premium associated with the call option: $

2. If Yonan's stock price increases to $70, what would be the return to an investor who bought a share of the stock? If the investor bought a call option on the stock? If the investor bought a put option on the stock? Round your answers to two decimal places.

Investment	Returns
Own stock	%
Buy call option	%
Buy put option	%

C.

If Yonan's stock price decreases to $40, what would be the return to an investor who bought a share of the stock? If the investor bought a call option on the stock? If the investor bought a put option on the stock? Round your answers to two decimal places.

Investment	Returns
Own stock	%
Buy call option	%
Buy put option	%

D. If Rachel buys 0.6 share of Yonan Communications and sells one call option on the stock, has she created a riskless hedged investment? What is the total value of her portfolio under each scenario? Round your answers to the nearest cent.

Rachels investment strategy would yield a payoff of $______, if the ending stock price is $40.00. Her investment strategy has a payoff of $______ , if the ending stock price is $ 70.00. The strategies__(do not or do have identical)____ payoffs; therefore, this __(not or is)____a riskless hedged portfolio.

E. If Rachel buys 0.75 share of Yonan Communications and sells one call option on the stock, has she created a riskless hedged investment? What is the total value of her portfolio under each scenario? Round your answers to the nearest cent.

Rachels investment strategy would yield a payoff of $_____, if the ending stock price is $ 40.00. Her investment strategy has a payoff of $_______, if the ending stock price is $ 70.00. The strategies ____do not have or have identical_____ payoffs; therefore this ____is or is not___ a riskless hedged portfolio.

For D and E just need payoffs and the _____ Thank you!