1. Let S(t) be the price of a given security at time t. All of the following options have exercise time t and, unless stated otherwise, exercise price K. Give the payoff at time t that is earned by an investor who:
(a) owns one call and one put option;
(b) owns one call having exercise price K1 and has sold one put having exercise price K2;
(c) owns two calls and has sold short one share of the security;
(d) owns one share of the security and has sold one call.
2. ZZZ Stock has a beta of 1.23. The RF rate of return is 4.5% and the market rate of return is 10%. What is the amount of risk premium on ZZZ stock?
4.47%
5.50%
5.54%
6.77%
12.30%
6.99%