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7. You buy a share of stock, write a 1-year call option with X $10 and buy a 1-year put option with X - $10. Your net outlay
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Answer #1

1.
Payoff=St-MAX(St-10,0)+MAX(10-St,0)=10

2.
1 year annually compounded risk free interest rate=10/9.50-1
=5.26316%

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