Task 1:

The Put-Call Parity formula in Option Pricing theory is as follows:

C = P + S - X(e-rt) or

P = C + X(e-rt) - S

where C is call price, P is put price, S is price of underlying asset, X is exercise price, r is annual effective rate, and t is the number of years of the option period.

(1) Create a user defined function, CallPrice, that calculates the call price given P, S, X, r, and number of days for the option (assume there are 365 days in a year).

(2) Create a user defined function, PutPrice, that calculates the put price given C, S, X, r, and number of days for the option (assumere there are 365 days in a year).

(3) Create a user defined function, Arbitrage (given C, P, S, X, r, and number of days for the options) that returns

a. "sell call, buy put, buy stock, and borrow" if C is greater than the call price determined by P,

b. "sell put, buy call, short stock, and lend" if P is greater than the put price determined by C, and

c. "no arbitrage opportunity" if the put-call parity holds.

(Must use Select Case for (3). *Note: You do not need to do two calculations because the Put-Call Parity mathematically holds true.)

(You use use "Round" to round your calculated put or call price to two decimal places to avoid trivial answers.)