1. Noncallable bonds that mature in 5 years were recently issued by Sternglass Inc. They have a par value of $1,000 and an annual coupon of 5%. If the current market interest rate is 5%, at what price should the bonds sell?
2. The current price of a stock is $47, the annual risk-free rate is 6%, and a 1-year call option with a strike price of $64 sells for $8.6. What is the value of a put option, assuming the same strike price and expiration date as for the call option?
3. Suppose you write 26 put option contracts with a $80 strike. The premium is $2.40. Evaluate your potential gains and losses at option expiration for stock prices of $70, $80, and $90. (Input all amounts as positive values.)