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For each case below, you are the trader on the opposite side of the trade with me at time to 0) . For each case below, state the trade you will perform with me at time to-0). For each case, you must explain the reason for your trading decision Note: You are not permitted to say that you do not want to trade You must go either long or short In all cases, both you and I begin with a portfolio of zero (no cash, no stock, options, etc.) 1. I also act as the bank. 2. Money required to buy things is borrowed from me. Interest must be paid on the loan 3. Mouey red by sn things is loaned to e. I will pay you interest on the savings 4. The borrow and lend interest rates are equal. Both are equal to the risk-free rate 5. There is no limit on the quantity to buy or sell anything, including short selling of stock In all the cases below 1. The current value of the stock price is S100 2. The stock does not pay divideuds 3. For questions involving a stock index, the current value of the index is 1000 points 4. The stock index has a continuous dividend yield of 1.5% 5. The interest rate is 5% (borrow and iend rates are equal) 6. All the options have the same expiration time of 1 yeaur 7. All the forward/futures contracts have the same expiration time of 1 year . Recall the stock pays no dividends. the interest rate ?s )% nd the expiration t illie 1H 1 vear A portfolio consists of (a) short one European call, (b) long one European put (c) long one forward contract. o Both the call and the put have the same strike price of 99 . The forward price also equals 99 Th e portfolio trades at a price of 1 . Note the following: 1. The portfolio is a package 2. The above statement "trades at a price of 1" means the price of the entire package 3. The "price" is the price of the entire package 4. You must go long/short the entire package 5. You cannot say "I will go long only the forward contract but I do not want the options" ctc. 6. The same policy applies to all the other portfolios below .State which position (long/short) you wl take, to trade this portfolio with me at time to . Explain the reason for your trading decision

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