For the following problem assume the effective 6-month interest rate is 2 %, the S-T 6-month forward price is $ 1020, and use the premiums listed below for S-T options with 6 month to expiration.
| Strike | Call | Put |
| 950 | 120.405 | 51.777 |
| 1000 | 93.809 | 74.201 |
| 1020 | 84.47 | 84.47 |
| 1050 | 71.802 | 101.214 |
| 1107 | 51.873 | 137.167 |
1)
Suppose you buy the S-T index for $ 1000 and buy a 950-strike put. Determine the profit for the following S-T index spot prices at expiry.
When price is $ 925, the profit is $
?
When price is $ 950, the profit is $
?
When price is $ 975, the profit is $
?
When price is $ 1000, the profit is $
?
When price is $ 1025, the profit is $
?
When price is $ 1050, the profit is $
?
When price is $ 1075, the profit is $
?
When price is $ 1100, the profit is $
?
When price is $ 1125, the profit is $
?
2) Suppose you buy a 950-strike call and invest $ 931.37 in zero-coupon bonds. Determine the profit for the following S-T index spot prices at expiry.
When price is $ 925, the profit is $
?
When price is $ 950, the profit is $
?
When price is $ 975, the profit is $
?
When price is $ 1000, the profit is $
?
When price is $ 1025, the profit is $
?
When price is $ 1050, the profit is $
?
When price is $ 1075, the profit is $
?
When price is $ 1100, the profit is $
?
When price is $ 1125, the profit is $
?
You can earn partial credit on this problem.