In portfolio models, the risk is minimized by diversification?

True

False

IT is based on forwards and subject is MA270 financial math

A United States company expects to have to receive 1 million Canadian dollars in six
months. Explain how the exchange rate risk can be hedged using
3.1 a futures contract;
3.2 an option. 

True or false? Please give a reason! Thank you!

1. Suppose a stock has a call option and a put option with the same maturity and strike price. Currently, the stock price is the same as the strike price, and the call option premium is the same as the put option premium. If the interest rate is zero, this stock should have a positive dividend.

2. Similar to a forward contract, a trader who wants to do a futures contract trading does not need cash to trade the contract.

3. Fizer Inc., a pharmaceutical company, announces that the company will begin producing the cure for the COVID-19 after 6 months. The stock price jumped 10% because of the news. The stock futures price with 6 months maturity will move by 10% as well.

The following is a hypothetical stock price of ABC, Inc. for the next 2 years. The company does not pay dividends. Each step represents one year. The current stock price is $400 and the risk-free rate is 4%.

This table is the picture I uploaded!!!

a. Using the tree, calculate the price of a CALL option with a $440 strike price and 2 years to maturity.

b. Using the tree, calculate the price of a PUT option with a $440 strike price and 2 years to maturity.

c. Does the Put-Call Parity hold using your numbers in a and b?

d. Suppose an investment banker changes the term of call options. He adds the following clause: “If the stock price increases higher than $450 before the maturity date of the call option, the call option will be voided immediately and have no value”. What is the value of the call option (K=$440) with this clause?

Thank you!!!