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You wish to create a financial instrument that has a payoff in 6 months' time equal to the maximum value of $1,000 and $1,000 +

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You wish to create a financial instrument that has a payoff in 6 months' time equal to the maximum value of $1,000 and $1,000 + $0.3*(S&P Index in 6 months' time -3,200). The current S&P 500 index are trading at 3,200, and the 6-month call and put options with strike price 3,200 is trading at 110 and 105, respectively. What is the cost of your instrument? (9 marks)

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