Question: Question 1 a} Explain what is meant by a perfect hedge. Does a perfect hedge always lead to a better outcome than an imperfect hedge?

Question 1 a} Explain what is meant by a perfect hedge. Does a perfect hedge always lead to a better outcome than an imperfect hedge? (10 marks} b} An investor pays $2 for a call with strike price of $35 and pays $1 for a put with strike price of $30. Determine the payoff, profitfloss and the breakeyen points for this strategy. What is the name of this strategy? Draw a diagram for this strategy. (30 marks} c} Discuss how margin system for futures contract protect inyestors against default risk. (10 marks} [Total 50 marks]

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