1)?A stock sells for $60 and the risk-free rate of interest is 10%. A call and a put on this stock expire in one year and both options have an exercise price of $55. How would you trade to create a synthetic call option? If the put sells for $2, how much is the call option worth? (Assume annual compounding.)?(Points : 30
2)What is the relationship between the risk of the underlying stock and the call price? Explain in intuitive terms.
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