3.Alex has a portfolio consisting of the below:A borrowing of €100 at the risk-free rate,a long position in a six-month put option on stock AA with an exercise priceof €200 (1.e., EX = €200), anda short position in a six-month put option on stock AA with an exercise priceof €100 (i.e., EX = €100).a.Provide two other combinations of loans, options, and the underlying stock thatwould give Alex the same payoffs.b. Today is 16 December 2021. A pension fund has a $50 million obligation dueexactly 7 years from now and pays 3% interest (compounded annually) on thisobligation. Assume that the term structure is flat.How many AAPL and MSFT bonds should the pension fund buy to form a portfoliothat will ensure that the pension fund will meet its obligation in 7 years' time?AAPL bond has a modified duration of 19.85 and MSFT bond has a modifiedduration of 3.65.Use the information provided in the table below. Note that the quoted price is theclean price.MSFTAAPLPrice ($)Yield (%)Par value ($)Modified duration (%)Last coupon dateCoupon frequencyDay count principleMaturity967.60631,00019.8508 Aug 2021annually30/36008 Aug 20501065.59731,0003.6503 May 2021annually30/36003 May 2025

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Alex has a portfolio consisting of the below: A borrowing of €100 at the risk-free rate, a long position in a six-month put option on stock AA with an exercise price of €200 (1.e., EX = €200), and . a short position in a six-month put option on stock AA with an exercise price of €100 (i.e., EX = €100). Provide two other combinations of loans, options, and the underlying stock that would give Alex the same payoffs.

Alex has a portfolio consisting of the below: A borrowing of €100 at the risk-free rate, a long position in a six-month put option on stock AA with an exercise price of €200 (1.e., EX = €200), and . a short position in a six-month put option on stock AA with an exercise price of €100 (i.e., EX = €100). Provide two other combinations of loans, options, and the underlying stock that would give Alex the same payoffs.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 5P

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