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Question 1Assume Alpha Ltd is currently trading on the NYSE with a stockprice of $65. The American one-year call option on the stock istrading at $20 with strike price of $65. If the one-year rate ofinterest is 10% p.a. (continuously compounding), is the call pricefree from arbitrage or is it too cheap/expensive, assuming that thestock pays no dividends? What if the stock pays a dividend of $5 inone year?Question 2The current price of a non-dividend paying stock is $35. Use atwo-step tree to value an American put option on the stock with astrike price of $33 that expires in 12 months. Each step is 6months, the risk free rate is 6% per annum (continuouslycompounding), and the volatility is 15%. What is the option price?Show work in detail and use a tree diagram (Use 4 decimalplaces).Question 3Two firms X and Y are able to borrow funds as follows:Firm A: Fixed-rate funding at 3.5% and floating rate atLibor-1%.Firm B: Fixed-rate funding at 4.5% and floating rate atLibor+2%.Assume A prefers fixed rate and B prefers floating rate. Showhow these two firms can both obtain cheaper financing using a swap.What swap strategy would you suggest to the two firms if you werean unbiased advisor? What is the net cost to each party in theswap? Show your work in detail.Three answers are needed from three questions