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8. A European call option and put option on the stock both have a strike price of $20 and an expiration date in three months. Both sell for $3.00. The risk-free interest rate is 10% per annum, the current stock price is $19, and a $1.00 dividend is expected in one month. What arbitrage profit is available? ____________

9. A call option with a strike price of $50 costs two dollars. A put option with a strike price of $45 cost three dollars. Create a short strangle from these two options.

What are the breakeven points? _________and ___________

What will be the profit if the price is $47.30 at expiration? ___________

What will be the profit if the price is $39.40 at expiration? ___________

What will be the profit if the price is $54.19 at expiration? ___________

10. Use the options prices for Spotify Technoloogy to create a bear spread using the put options with strike prices 170 and 175. Be sure to use the appropriate bid and ask prices.

What will be your cash flow per share when you set up the position? Show all cash flows: inflows, outflows, and net flow. Inflow ___________

Net Flow___________

The maximum profit on the put bear spread is ___________

The minimum profit on the put bear spread is ___________

The breakeven point on the put bear spread is ___________

What will be your gain or loss per share on the net position if at expiration the price of Spotify is $172.25? ___________

11. Use the options prices for Spotify to create a bull spread using call options with 155 and 160 strike prices. Be sure to use the appropriate bid and ask prices.

What will be your cash flow per share when you set up the position? Show all cash flows: inflows, outflows, and net flow.

Inflow ___________

Net Flow ___________

The maximum profit on the call bull spread is ___________

The minimum profit on the call bull spread is ___________

The breakeven point on the call bull spread is ____________

What will be your profit per share on the net position if at expiration the price of the stock is $157.3?

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