Risk-free interest is low and analysts assume it is equal to 0% for valuation purposes. A n individual has an existing short position in one forward contract with two-month maturity. When the trader was opening her position, the forward price was equal to 6 000 000. The underlying asset does not have to pay any dividends or storage costs. One two-month European call option, written on the same underlying asset as the futures contract, costs 60 000. Today the trader decided to also buy two call options. Assume strike price, K, of the call options as well as the current price, A, of the asset underlying to both the futures and the options are both numerically equal to your student number

so: A = K = STUDENT NUMBER

QUESTION 1:

Compute the number n of the underlying asset price ranges at maturity for which the trader makes a profit (a non-negative integer, greater than one if these areas are disconnected).

n=?

QUESTION 2:

Derive the upper limit of the lowest such range, Au, as well as the lower limit, Al, of the highest such range. (help>> If n > 1, Au Al)

What is the values of Au= ?

and

Al=?