1. Consider a 6 year 8% coupon bond with a face value of 1000. It pays semi-annual coupons and is issued today.A call and put (both with the same strike price of 1050 and same 1 year maturity) on that bond are available. The call is priced at 80.The continuously compounded interest rate is 6%. Calculate the put price.

2. A non dividend paying stock, priced at 63 is the underlying asset for put and call options with a 3month maturity. Both options have a strike value of 65.The effective annual interest rate is 5%.The put option is 1.4 times the value of the call option. Calculate the put price, P.

3. A stock is priced at 105 and 6month options are written on the stock. An investor purchases a 100 strike European put for 5.65 and a 110 strike put for 10.63. If the force of interest is 6%, calculate the investors total profit after 6months given that the stock price remained unchanged over the 6month period. Which of the options (1-5) is correct?

1. -8.28

2. -5.28

3. -16.78

4. -14.28

5. -11.78

d) The interest rate (continuously compounded) for Euro dollars is 2% and the interest rate (continuously compounded) for US dollars is 5%. The current exchange rate is 0.85/$1. The price of a 6 month European call option on $1 with strike 0.832/$1 is $0.072. Calculate the price of a dollar-denominated 6-month European put option to sell 1 at $1.202/ 1. Which option (1-5) is correct?

1. 0.045

2. 0.067

3. 0.079

4. 0.082

5. 0.056