Screenshots of Problems to answer (21.14 and 21.13)

Reference: McDonald, R. L. (2013). Chapter 21. Derivatives Markets, Third Edition (p.646). Pearson.

21.13 You are offered the opportunity to receive for free the payoff [Q(T)F0,T(Q)]max[0,S(T)K] (Note that this payoff can be negative.) Should you accept the offer? 21.14 An agricultural producer wishes to insure the value of a crop. Let Q represent the quantity of production in bushels and S the price of a bushel. The insurance payoff is therefore Q(T)V[S(T),T], where V is the price of a put with K=$50. What is the cost of insurance? 21.13 You are offered the opportunity to receive for free the payoff [Q(T)F0,T(Q)]max[0,S(T)K] (Note that this payoff can be negative.) Should you accept the offer? 21.14 An agricultural producer wishes to insure the value of a crop. Let Q represent the quantity of production in bushels and S the price of a bushel. The insurance payoff is therefore Q(T)V[S(T),T], where V is the price of a put with K=$50. What is the cost of insurance