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You buy a share of stock, write a 1-year call option with X = $35, and buy a 1-year put option with X = $35.

You buy a share of stock, write a 1-year call option with X = $35, and buy a 1-year put option with X = $35. Your net outlay to establish the entire portfolio is $34. The stock pays no dividends.

a. What is the payoff of your portfolio?

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b. What must be the risk-free interest rate? (Round your answer to 2 decimal places.)

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Payoff Risk-free rate 0 0

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