For the following problems assume the effective 6-month interest rate is 2%, the S&R 6-month forward price is $1020, and use these premiums for S&R options with 6 months to expiration: Strike Call Put 950 120

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For the following problems assume the effective 6-month interest rate is 2%, the S&R 6-month forward price is $1020, and use these premiums for S&R options with 6 months to expiration:

Strike	Call	Put
950	120.405	51.777
1000	93.809	74.201
1020	84.47	84.47
1050	71.802	101.214
1107	51.873	137.167

Question 1: How would you create a box spread with a certain payoff of $50?

(a) Buy a call and sell a put both with a strike price of $1000 while simultaneously buying a put and selling a call with a strike price of $1050

(b) Buy a call and sell a put both with a strike price of $950 while simultaneously buying a put and selling a call with a strike price of $1050

(c) Buy a call and sell a put both with a strike price of $1000 while simultaneously buying a put and selling a call with a strike price of $1020

(d) Buy a put and sell a call both with a strike price of $1000 while simultaneously buying a call and selling a put with a strike price of $1050

Question 2: What is the implied effective 6-month interest rate from the box spread? (decimal form)

Question 3: Say you wanted to borrow $68.63 money risk-free by trading in the options above. What strategy would allow you to do this?

(a) Buy a put and sell a call both with a strike price of $950 while simultaneously buying a call and selling a put with a strike price of $1020

(b) Selling call options at strike prices of $950 and $1000, while buying a put option with a strike price of $1020

(c) Buy a put and sell a call both with a strike price of $1000 while simultaneously buying a call and selling a put with a strike price of $1050

(d) Buy a call and sell a put both with a strike price of $1000 while simultaneously buying a put and selling a call with a strike price of $1050

Question 4: According to put-call parity, what is the implied price of one share of S&R?