Your firm can borrow fixed at 8% and floating at Libor+1%. You can also enter into a fixed-for-Libor swap where the fixed rate is 6.5% (and the swap has the same maturity as the borrowing). What is the cheapest way for the firm to obtain fixed rate financing?

A. Borrow floating rate and then swap into fixed rate using the swap.

B. Borrow at the fixed rate and then swap into floating rate using the swap.

C. Borrow at the floating rate.

D. Borrow at the fixed rate.

The current price of a stock is $100. What is the Black-Scholes model price of a six-month put option at strike $98, given an interest rate of 2% ? The volatility is 45%.

Stock Price 42

Exercise Price 40

Risk-free Rate 10.00%

Time to Maturity 0.5

Volatitily 20.00%

d1= 0.769262628

d2= 0.627841272

N(d1)= 0.779131291

N(d2)= 0.734946037

Call Price 4.759422393

Put Price 0.808599373

A. $11.02

B. $11.68

C. $11.73

D. $14.00