1. Let r=.08, S= $100, alpha=0, and delta=.3. Using the risk-neutral distribution, simulate 1/S1. What is E(1/S1)? What is the forward price for a contract paying 1/St?
2. Suppose the real rate is 3.2 percent and the inflation rate is 4.8 percent. What rate would you expect to see on a Treasury bill? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16
3. How can financial modeling be utilized in investment strategies, explain the term dynamic investment strategy in the context of portfolio insurance and simulating a butterfly.