1. Suppose that a trader enters into a long futures position for 1000 oil barrels with a delivery date on December 2016 and a future price of $40 per barrel. Suppose that on delivery date, the spot price of oil is $45 per barrel. What is the payoff to the long position?
2. An investor purchases a stock for $28 and a put on the stock for $0.40 with a strike price of $24. She also sells a call on the same underlying stock for $0.40 with a strike price of $30 and with the same expiration date. What is the value of her portfolio, net of the proceeds from the options, if the stock price ends up at $35 on the expiration date?
3. A spread is a combination of two or more call options on the same stock with differing exercise prices or times to maturity. Some options are bought, and others are sold. Consider a bullish spread option strategy where you buy a call option with a $35 exercise price priced at $4 and sell a call option with a $50 exercise price priced at $2.50. If the price of the underlying stock increases to $60 at expiration and each option is exercised on the expiration date, what is your net profit?
4. Earnings and dividends per share at G3-Biz Inc. are expected to grow at a rate of 18 percent over the next two years, then at 15 percent in the third year, and then at 6 percent thereafter. G3- Biz just paid a dividend of $1.15. If the required rate of return on the stock is 12 percent, what is the price of a share of G3-Biz stock today? Round off to two decimal points.