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Please finish the attached HW about Fixed IncomeMake sure you are good at fixed incomefinish the attached hw (about call and put options).Make sure you read the questions first and give me all accurate and excellent answer.show your calculation specifically
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Yale SOM MGT805 Fixed Income
Fall 2023
Homework #4
Question 1
Draw the payoff diagram at maturity for the following option combinations. All
options are European style and have the same maturity. Label your diagram
carefully.
Bull Spread – long a call option at strike K1 and short a call at strike K2
Bear Spread – long a put option at strike K2 and short a put at strike K1
Box Spread – the bull spread plus the bear spread above (same strikes, K1 & K2)
Question 2
The diagrams below show the cash payoffs in one month on two different securities.
How can you replicate each payoff using only European call and/or put options? In
each case list the options, the strike prices, whether you are long or short, and how
much of each option.
a.
b.
K
K
2K
3K
K
2K
3K
-K
Question 3
The table below shows the prices of 3-month European puts and calls on XYZ stock
(assume XYZ does not pay dividends).
Strike
Call
Put
22
3.217
0.232
26
0.828
1.824
27
0.531
P
a. What is the present value of a 3-month forward contract on XYZ with a
contract price of $22?
b. What is the price of a 3-month zero-coupon bond?
c. What is the price of a put with a strike price of $27?
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