Computational question

Question 1

find f

Answer 1

(1+rf) (1+f) = (1 + second yield)^2

Question 2

if the 2-year yield was 0.5% (orginally higher), what happens to european straddle price

Answer 2

Rfr goes down in year two, means q goes down, so call price goes down, put price goes up.

Question 3

At the money straddle meaning

Answer 3

The initial price

Question 4

European straddle

Answer 4

Hold calls and put

Question 5

European bull spread

Answer 5

calculating puts and calls from two different strike prices and choosing smaller combination