Find the present value of the payoff

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1. There are two call options for the same and same One call option C1 has exercise price of $120 and the other call option C2 has exercise price of $150. Also, one call sells for $8 and the other sells for $10. Select the prices of C1 and C2 from the given two values. Explain your argument for the price selection with the help of payoff of the cell options.

2. If you construct a hedged portfolio that provides a payoff of $100 thousand in one year for all the economic condition of the market, what is the discount rate that you are going to use to find the present value of the payoff? Give reasons for your selection of the discount rate.

Reference no: EM132033726

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