Doleg opp , d MATH Y2¢ 2012 Frae@ (1) For which values of the interest rate it is better to receive $100 immediately and $120 after two years than to receive $110 im- mediately and $ 100 after two years? (2) A certain stock will either gain 20% or loose 10% during the first period and either gain 10% or loose 10% during the second period. The interest rate is 3% per period. The present price of the stock is $ 100. Find the no arbitrage price of the European put option with strike price $ 97 and expiration time 2 periods (3) Certain stock pays 2% in dividents twice a year: on January lst and July Ist. The stock price between the payments fol- lows geometric Brownian Motion with drift parameter 0.03 and volatility 0.2. The interest rate is 5% per year. Find the price of the call option with strike price $100 and expiration time 9 ‘months if the price of the stock on the date of sale is $ 99 and the date of sale is (a) August 1; (b) December 1. (4) You have $ 100. You can participate in a gamble in which you win an amount $a with probability 0.8 and loose the same amount with probability 0.2. How much money should you bet. if your utility function equals 2/9?