1. You have a bowl of k spaghetti noodles, presumably cooked and flexible.
A trial consists of randomly choosing an end of a noodle for each hand,
then gluing them together. Suppose you do k trials (same as number
of noodles). What is the expected number of closed circuits?
2. Value the following european option on a stock:
Stock Price = $60
Strike Price1 = $40
Strike Price2 = $30
constant annual vol = 20%
Time to Mat = 1Yr
RiskFree rate (1 YR) = 5%
Payoff at maturity (T):
P = $0, S(T) < $30
P = $2, $30 < S(T) < $40
P = $0, $40 < S(T)
