arks for each correct answer$)$

forward contract is trading at US $$215$ per share. A trader can sell the IBM share in $6$ months at a

the next $6$ mont price of US $$217.$ The present value of dividends to be collected on the share over

breaks even $($does is US$$3.$ What is the interest rate on borrowing cost to the trader if he$/$she

compounding.$)$ not gain or lose$)$ on the forward contract at its maturity? $($Use discrete annual

Which of the following European stock put prices provides a risk$-$free arbitrage opportunity? The

puts all have the same underlying stock selling at $$10,$ same exercise price $$90,$ and are traded at

the same point in time. But they have different maturities as indicated. Risk$-$free interest rate is

$5\%.($Use discrete annual compounding.$)$

$[]3-$month, $p_0=$$$89$

$[]6-$month, $p_0=$$$87$

$[]9-$month, $p_0=$$$85$

$[]1-$year, $p_0=$$$84$

BigTime Investments is considering sale of a $6-$month European put at exercise price of $$60.$ Price

of non$-$dividend paying stock is $$65.$ Stock price is expected to either go up or down by $10\%$ over

the next $6$ months. Risk$-$free rate is $4\%.$ What is the one$-$period binomial option model no$-$

arbitrage price of the put? $($Use discrete annual compounding.$)$

$]$ $$0\mathrm{.}16$

$]$ $$0\mathrm{.}59$

$$$ $0\mathrm{.}63$

$[]$ None of the above

A non$-$dividend paying stock is selling at $$40.$ A European call and a European put on this stock are

priced at $$6$ and $$9.$ They have the same exercise price $$45$ and same maturity of $6$ months. A risk$-$

free zero$-$coupon bond with $6$ months to maturity is priced at $95\%$ of par value. What is the

arbitrage profit if any that you can make from trading in these assets? $($Use discrete annual

compounding.$)$