Answer using excel

Consider the following policy for hedging. Let R0 be its return (net present value). If the price of the stock increases more than 3 percent in the first six months, buy a European call option for the next six months. Otherwise, buy a European put option for the next six months. Set the exercise price of the put option at $97 and assume the price of the put option is $2.35. Assume the cost of the call option is $3.40, sample size N : 1000. Use the following parameters for the geometric random walk model for the stock price movement. SD: 100 ,% m= 0.08,% s= 0.1; % r= 0.059;% Kp= 97;% ic: 0.03,% Kc= 103;% cc= 3.4;% cp= 2.35;% N= 10'3; % Questions Current Price 50 Drift m Volatility s Expiration Time T Time interval for observing stock price Riskifree Rate r Exercise Price K for put option Percentage Increse for call option Strike price for call option Price of a call option Price of a put option Sample size 1. What is the distribution (histogram) of R0? Compute the relative frequency of R0 based on the simulated sample, and graph the histogram. 2. What is the expect return of the hedging strategy? And its 90% confidence interval? 3. What is the probability that R0