The above diagram shows the payoff of a position taken in a futures contract. Which of the following statements is false?

a.The payoff shows a long position taken in the futures contract.

b.The payoff is negative when price of the underlying is below $20.

c.

The payoff shows a short position taken in the futures contract.

d.The payoff is positive when price of the underlying is above $20.

2.

If you buy a put option on share ABC with a strike price at $105. If the market price of ABC at expiration is $110,

a.

you will not exercise the put option.

b.

you will exercise the put option.

c.

you will not exercise the call option.

d.

you will exercise the call option.

What is the price of a European put option on a non-dividend-paying stock when the stock price is $50, the strike price is $47, the continuously compounded risk-free rate is 2% per annum, the standard deviation is 30% per annum, and the time to maturity is six months? (rounded to two decimal places)

a.

$6.04

b.

$3.00

c.

$3.31

d.

$2.57