What is the implicit interest rate in these cash ?ows

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Suppose you enter into a short 6-month forward position at a forward price of $60. What is the payoff in 6 months for prices of $50, $55, $60, $65, and $70? Suppose you buy a 6-month put option with a strike price of $60. What is the payoff in 6 months at the same prices for the underlying asset? Comparing the payoffs of parts (a) and (b), which contract should be more expensive (i.e., the long put or short forward)? Why is this so? Use the following premiums for S&P options with 6 months to expiration: Strike Call Put $950 $120.405 $51.777 1000 93.809 74.201 1020 84.470 84.470 1050 71.802 101.214 1107 51.873 137.167 Assume you buy a 1,000-strike S&P call, sell a 1050-strike S&P call, sell a 1,000-strike S&P put, and buy a 1050-strike S&P put. a. Using a table, verify that there is no S&P price risk in this transaction. b. What is the initial cost of the position? c. What is the value of the position after 6 months? d. What is the implicit interest rate in these cash ?ows over 6 months?

Reference no: EM13974577

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