These are the finance questions and the statements marked red are my questions, please read the question and answer. Please show the calculations and put the number of the questions like 3.1, 3.2.1 beside the answer . Thanks

3 Question 3 o For each case below, you are the trader on the opposite side of the trade with me at time t0(: 0). o For each case below, state the trade you will perform with me at time t0(= 0). o For each case, you must explain the reason for your trading decision. 0 In all cases, both you and I begin with a portfolio of zero (no cash, no stock, options, etc]. 1. Money required to buy things must be borrowed from me. Interest must be paid on the loan. 2. Money received by selling things is loaned to me. I will pay interest on the savings. 3. The borrow and lend interest rates are equal. Both are equal to the risk-free rate. 4. There is no limit on the quantity to buy or sell anything, including short selling of stock. 0 In all the cases below: The current value of the stock price is SD = 100. The stock does not pay dividends. For questions involving a stock index1 the current value of the index is 1000 points. The stock index has a continuous dividend yield of 1.5%. The interest rate is 5% (borrow and lend rates are equal]. All the options have the same expiration time of 1 year. 74991:\"pr All the forward/futures contracts have the same expiration time of 1 year. 0 See next page. 3.1 A portfolio consists of: (a) long one European call, (b) short one European put, (c) short one forward contract. Both the call and the put have the same strike price of 105. The forward price also equals 105. The portfolio trades at a price of 1. State which position (long/short) you will take, to trade this portfolio with me at time :20. Explain the reason for your trading decision. 3.2 A portfolio consists of: (a) long one European call, (b) short one European put, (c) short one forward contract. Both the call and the put have the same strike price of K = 96. The forward price is K ~ 1 = 95. 3.2.1 The portfolio trades at a price of 1. State which position (long/short) you will take, to trade this portfolio with me at time :30. Explain the reason for your trading decision. 3.2.2 The portfolio trades at a price of 0.9. State which position (long/short) you will take, to trade this portfolio with me at time in. Explain the reason for your trading decision. 3.2.3 The portfolio trades at a price of 1.1. State which position (long/short) you will take, to trade this portfolio with me at time in. Explain the reason for your trading decision. 3.3 3.3.1 A portfolio consists of: (a) long one European call with strike 99, (13) long one European put with strike 101. The portfolio trades at a price of 1. State which position (long/short) you will take, to trade this portfolio with me at time 150. Explain the reason for your trading decision. 3.3.2 A portfolio consists of: (a) long one American call with strike 99, (b) long one American put with strike 101. The portfolio trades at a price of 1. State which position (long/short) you will take, to trade this portfolio with me at time in. Explain the reason for your trading decision. If you buy the portfolio, state the trades you will perform with it and when you will execute those trades. 3.3.3 A portfolio consists of: (a) long one American call with strike 99, (b) long one American put with strike 101. The portfolio trades at a price of 1.99. State which position (long/short) you will take, to trade this portfolio with me at time t0. Explain the reason for your trading decision. If you buy the portfolio, state the trades you will perform with it and when you will execute those trades. 3.4 A stock index has a current value of 1000 index points. The interest rate is 5% and the index has a dividend yield of 1.5%. The volatility of the index is 30%. 3.4.1 An American call option on the stock index has a strike of 900 and expiration of 1 year. The option is cash settled with a multiplier of $1 for every index point that the option is in the money. The option is currently trading at a value of 75 index points. State which position (long/short) you will take, to trade this portfolio with me at time t0. Explain the reason for your trading decision. If you buy the option, state the trades you will perform with it, and when you will execute those trades. 3.4.2 An American put option on the stock index has a strike of 1050 and expiration of 1 year. The option is cash settled with a multiplier of $1 for every index point that the option is in the money. The option is currently trading at a value of 35 index points. State which position (long/short) you will take, to trade this portfolio with me at time 160. Explain the reason for your trading decision. If you buy the option, state the trades you will perform with it, and when you will execute those trades