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For the whole assignment you can assume the following market data: US risk-free rate: RUS) = 2.4% p.a. Canadian risk-free rate: RCA) = 2.2% p.a. All interest rates are given with continuous compounding. Problem 1 (10 points) Consider a portfolio consisting of a long call stock option with exercise price $35 and a short put stock option with exercise price $31. Both options have the same underlying and time to maturity. The call option costs $3.45 and the put option costs $2.20. (a) (3 points) Calculate the profit function of your portfolio. (b) (2 points) What is the range of stock prices over which the portfolio provides a positive profit? (c) (3 points) Sketch the portfolio's profit function. (d) (2 points) Does it matter whether you use European- or American-style options? For the whole assignment you can assume the following market data: US risk-free rate: RUS) = 2.4% p.a. Canadian risk-free rate: RCA) = 2.2% p.a. All interest rates are given with continuous compounding. Problem 1 (10 points) Consider a portfolio consisting of a long call stock option with exercise price $35 and a short put stock option with exercise price $31. Both options have the same underlying and time to maturity. The call option costs $3.45 and the put option costs $2.20. (a) (3 points) Calculate the profit function of your portfolio. (b) (2 points) What is the range of stock prices over which the portfolio provides a positive profit? (c) (3 points) Sketch the portfolio's profit function. (d) (2 points) Does it matter whether you use European- or American-style options

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