solve the following asap

9. Stock ABC has the following characteristics: . The current price to buy one share is 100. . The stock does not pay dividends. European options on one share expiring in one year have the following prices: Strike Price Call option price Put option price 90 14.6 0.24 100 6.80 1.93 110 2.17 6.81 A butterfly spread on this stock has the following profit diagram. 6 4 2 80 85 90 95 100 105 110 115 120 -2 The continuously compounded risk-free interest rate is 5%. Determine which of the following will NOT produce this profit diagram. (A) Buy a 90 put, buy a 110 put, sell two 100 puts (B) Buy a 90 call, buy a 110 call, sell two 100 calls (C) Buy a 90 put, sell a 100 put, sell a 100 call, buy a 110 call (D) Buy one share of the stock, buy a 90 call, buy a 110 put, sell two 100 puts (E) Buy one share of the stock, buy a 90 put, buy a 110 call, sell two 100 calls. IFM-01-18 Page 6 of 105 10. Stock XYZ has a current price of 100. The forward price for delivery of this stock in 1 year is 110. Unless otherwise indicated, the stock pays no dividends and the annual effective risk-free interest rate is 10%. Determine which of the following statements is FALSE. (A) The time-1 profit diagram and the time-1 payoff diagram for long positions in this forward contract are identical. (B) The time-1 profit for a long position in this forward contract is exactly opposite to the time-1 profit for the corresponding short forward position. (C) There is no comparative advantage to investing in the stock versus investing in the forward contract. (D) If the 10% interest rate was continuously compounded instead of annual effective, then it would be more beneficial to invest in the stock, rather than the forward contract.14. The current price of a non-dividend paying stock is 40 and the continuously compounded risk-free interest rate is 8%. You are given that the price of a 35-strike call option is 3.35 higher than the price of a 40-strike call option, where both options expire in 3 months. Calculate the amount by which the price of an otherwise equivalent 40-strike put option exceeds the price of an otherwise equivalent 35-strike put option. (A) 1.55 (B) 1.65 (C) 1.75 (D) 3.25 (E) 3.35 IFM-01-18 Page 9 of 105 15. The current price of a non-dividend paying stock is 40 and the continuously compounded risk-free interest rate is 8%. You enter into a short position on 3 call options, each with 3 months to maturity, a strike price of 35, and an option premium of 6.13. Simultaneously, you enter into a long position on 5 call options, each with 3 months to maturity, a strike price of 40, and an option premium of 2.78. All 8 options are held until maturity. Calculate the maximum possible profit and the maximum possible loss for the entire option portfolio. Maximum Profit Maximum Loss (A) 3.42 4.58 (B) 4.58 10.42 (C) Unlimited 10.42 (D) 4.58 Unlimited (E) Unlimited Unlimited30. Determine which of the following is NOT a distinguishing characteristic of futures contracts, relative to forward contracts. {A} Contracts are settled daily, and marked-to-market' (B) Contracts are more liquid, as one can offset an obligation by taking the opposite position (C) Contracts are more customized to suit the buyer's needs. (D) Contracts are structured to minimize the effects of credit risk. (E) Contracts have price limits, beyond which trading may be temporarily halted. 3 l. DELETED 32. Judy decides to take a short positionin ZDcontracts of 5&P 50!] futures. Each contract is for the delivery of 250 units of the index at a price of 1500 per unit, exactly one month from now. The initial margin is 5% of the notional value, and the maintenance margin is 90% of the initial margin Judy earns a continuously compounded risk-free interest rate of-'l'lt. on her margin balance. The position is marked-to-market on adaily basis. 0n the day of the rst marking-to-market, the value ot'the index drops to 1498. On the day of the second marking-to-market, the value of the index is X and Judyis not required to add anything to the margin account. Calculate the largest possible value of X; (A) 149050 (5) 1492.50 (C) 1500150 to} 150550 (E) 150150 IFM-l-l Page 15 of 105 33. Several years ago, John bought three separate 15-month options on the same stock. e Option I was an Americanastyle put with strike price 20. e Option 11 was a Bermuda-style call with strike price 25, where exercise was allowed at any time following an initial 3-month period of call protection. e Option I[[ was aEuropeanstyle put with strike price 30. When the options were bought, the stock price was 20' When the options expired, the stock price was 215. The table below gives the maximum and minimum stock price during the 15 month period: Time Period: 1\" 3 months of Option Term 2"1 3 months of Option Term Maximum Stock Price 24 28 Minimum Stock Price 18 22. John exercised each option at the optimal time; Rank the three options, from highest to lowest payoff. 35. A customer buys a 50-strike put on an index when the market price of the index is also 50. The premium for the put is 5. Assume that the option contract is for an underlying 100 units of the index. Calculate the customer's profit if the index declines to 45 at expiration. (A) -1000 (B) -500 (C) 0 (D) 500 (E) 1000 36. DELETED 37. A one-year forward contract on a stock has a price of $75. The stock is expected to pay a dividend of $1.50 at two future times, six months from now and one year from now, and the annual effective risk-free interest rate is 6%. Calculate the current stock price. (A) 70.75 (B) 73.63 (C) 75.81 (D) 77.87 (E) 78.04 IFM-01-18 Page 18 of 105 38 The current price of a medical company's stock is 75. The expected value of the stock price in three years is 90 per share. The stock pays no dividends. You are also given i) The risk-free interest rate is positive. ii ) There are no transaction costs. iii) Investors require compensation for risk. The price of a three-year forward on a share of this stock is X, and at this price an investor is willing to enter into the forward. Determine what can be concluded about X.40. An investor is analyzing the costs of two-year, European options for aluminum and zinc at a particular strike price. For each ton of aluminum, the two-year forward price is 1400, a call option costs 700, and a put option costs $50. For each ton of zinc, the two-year forward price is 1600 and a put option costs 550. The annual effective risk-free interest rate is 6%. Calculate the cost of a call option per ton of zinc. (A) 522 (B) 800 (C) 878 (D) 900 (E) 1231 41. XYZ stock pays no dividends and its current price is 100. Assume the put, the call and the forward on XYZ stock are available and are priced so there are no arbitrage opportunities. Also, assume there are no transaction costs. The annual effective risk-free interest rate is 1%. Determine which of the following strategies currently has the highest net premium. (A) Long a six-month 100-strike put and short a six-month 100-strike call (B) Long a six-month forward on the stock (C) Long a six-month 101-strike put and short a six-month 101-strike call (D) Short a six-month forward on the stock (E) Long a six-month 105-strike put and short a six-month 105-strike call IFM-01-18 Page 20 of 105 42. An investor purchases a non-dividend-paying stock and writes a f-year, European call option for this stock, with call premium C. The stock price at time of purchase and strike price are both K. Assume that there are no transaction costs. The risk-free annual force of interest is a constant r. Let $ represent the stock price at time t. S > K. Determine an algebraic expression for the investor's profit at expiration