a-c are based on the following European stock-index options with expiration T =

Question

a-c are based on the following European stock-index options with expiration T = 0.25 years.

[Strike K #1 = 975][Call Price #1 = 77.716][Put Price #1 = 43.015]

[Strike K #2 = 1025][Call Price #2 = 53.115] [Put Price #2 = 67.916]

A. Find the continuously compounded annual interest rate r.
B. What strategy will lock in a 975 purchase price (to be paid at T) for delivery of the
index at T? For what value of ST will the profit of this strategy be zero?
C. What is the forward price?

please do atleast part a ... thanks

Explanation / Answer

77.716+975e^(-.25r)= 43.015+975 e^-.25r=.9644 r= 15%

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