Question: Question 7 (Total 13 marks) Required: a. Explain how to create a synthetic portfolio to replicate a stock using Put-Call Parity. (1 mark) b. Use

Question 7 (Total 13 marks) Required: a. Explain how to create

Question 7 (Total 13 marks) Required: a. Explain how to create a synthetic portfolio to replicate a stock using Put-Call Parity. (1 mark) b. Use equations and symbols to derive the net investment for this synthetic portfolio at initiation (Date 0). (2 marks) c. Use equations and symbols to derive the net positions of the portfolio at expiration (Date T) if (1) ST X. (4 marks) d. What are the two practical implications of the Put-Call parity results? (6 marks) Question 7 (Total 13 marks) Required: a. Explain how to create a synthetic portfolio to replicate a stock using Put-Call Parity. (1 mark) b. Use equations and symbols to derive the net investment for this synthetic portfolio at initiation (Date 0). (2 marks) c. Use equations and symbols to derive the net positions of the portfolio at expiration (Date T) if (1) ST X. (4 marks) d. What are the two practical implications of the Put-Call parity results? (6 marks)

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