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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+
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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Intermediate Accounting
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield.
9th Canadian Edition, Volume 2
470964731, 978-0470964736, 978-0470161012
