1. A European put option on a non-dividend paying stock with a strike price of $40 and an expiration date in six months costs $1. The stock price is $37 and the risk-free rate is 5% per annum. What arbitrage opportunities does this create and what is the minimum arbitrage profit in PV terms?
2. A chemical engineer wishes to set up a special fund by making uniform semi-annual end-of- period deposits for 20 years. The fund is to provide Php 100,000 at the end of each of the last five years of the 20 year period. If interest is 8% compounded semi-annually, what is the required semi-annual deposit to be made?