1. The market price of Andover stock has been very volatile and you think this volatility will continue for a few weeks. Thus, you decide to purchase a 1-month call option contract with a strike price of $40 and an option price of $1.08. You also purchase a 1-month put option contract on the stock with a strike price of $40 and an option price of $.35. What will be your total profit or loss on all the transactions related to these option positions if the stock price is $37.40 on the day the options expire?
a $92
b -$92.00
c -$130.00
d $108
e $117
2. Westford Company has a $10,000 pure discount bond that comes due in one year. The risk-free rate of return is 3 percent. The firm's assets are expected to be worth either $7,000 or $14,000 in one year. Currently, these assets are worth $11,000. What is the current value of the firm's debt?
$10,170.47
$9,812.66
$9,150.84
$8,643.27
$8,597.78