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  3. you are given: (i) a stock index is 22.00 (ii) t

You are given: (i) A stock index is 22.00 (ii) The continuous dividend...

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Accounting

You are given:

(i) A stock index is 22.00

(ii) The continuous dividend rate of the index is 2%

(iii) The continuously compounded risk-free interest rate is 5%.

(iv) A 90-day European call option on the index with strike 21.00 costs 1.90.

(v) A 90-day European put option on the index with strike 21.00 costs 0.75.

You wish to create an equivalent synthetic stock index using a combination of options and lending.

Determine the amount of money you should lend.

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