Answer questions 13 using the following information: A stock currently sells for $50. It is known that at the end of two months it will either be $53 or $48. The risk- free rate is 10% per yr with continuous compounding. There is a call option on the stock with strike price K=$49 expiring in 2 months. 1) The delta hedge is a) 0.5 b) 0.25 c) 1.0 d) 0.8 2) The risk-neutral probability p is a) 0.5681 b) 0.6434 c) 0.3207 d) 1.2143 3) Using the binomial model, the price of the call is a) 2.52 b) 3.63 c) 4.025 d) 2.23 4) What is the price of a European call option on a non-dividend-paying stock when the stock price is $52, the strike price is $50, the risk-free interest rate is 12% per annum, the volatility is 30% per annum, and the time to maturity is three months? (Hint: N(d1)=0.7042 and N(d2)=0.6504) a) 4.36 b) 3.17 c) 9.03 d) 5.06 5) Using the information in problem 4, the probability of the call option being in the money on expiration is a) 0.65b ) 0.70c ) 0.32d ) 0.3 6) Using the information in problem 4, the probability of the putl option being in the money on expiration is a) 0.65 b) 0.70 c) 0.32 d) 0.35 Answer questions 7-9 using the following information: The lower bound for index call options is: cS0eqTKerT You also know that: S0=100,c=1.5,K=100,q=3%,r=5%,T=1yr. 7) The lower bound (i.e., minimum price) for the call is a) 5.50 b) 6.68 c) 1.92 d) 3.80 8) Arbitrage opportunities exist and can be exploited by a) buying the stock, selling the call and investing at r. b) buying the call selling the stock and investing at r. c) selling the stock and selling the call. d) selling the call and buying the stock. 9) At expiration the arbitrage profit is a) $0.42 minimum b) $3.12 maximum c) $2.9 minimum d) $3.55 minimum