Question: Question 1. In 2019 Shell PLC issued bonds for which the holder recrived no interest but at maturity received the face value of the bond,

Question 1. In 2019 Shell PLC issued bonds for

Question 1. In 2019 Shell PLC issued bonds for which the holder recrived no interest but at maturity received the face value of the bond, 11000, this is the amount lent by the bond holder to Shell PLC) plus an additional amount, A, which depended on the price of oil at the boud's maturity. This additional amount was set to be 170 times the excess, if any, of the price of a brol of oil over 25 subject to the condition that the additional amount, A. could not exceed 2550. (a) Find a formula for A in terms of so, the price of a barrel of oil fin dollars per barrel) at the band's maturity date (b) Express the additional amount in terms of a long position in a number of call options with strike E and a short position in a number of call options with striko Ey (Specify both the number and strikes of these call options, which are on the price of a barrel of oil.). Identify what trading strategy the additional amount is equivalent to 113 Marks

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