Math 489/889Stochastic Processes andAdvanced Mathematical FinancePractice Problems Homework 10Steve DunbarMonday, December 7, 2009
<Text-field style="Heading 1" layout="Heading 1">Initialization of Necessary Packages</Text-field>LUklbXJvd0c2Iy9JK21vZHVsZW5hbWVHNiJJLFR5cGVzZXR0aW5nR0koX3N5c2xpYkdGJzYlLUkjbWlHRiQ2JVEld2l0aEYnLyUnaXRhbGljR1EldHJ1ZUYnLyUsbWF0aHZhcmlhbnRHUSdpdGFsaWNGJy1JKG1mZW5jZWRHRiQ2JC1GIzYjLUYsNiVRKGZpbmFuY2VGJ0YvRjIvRjNRJ25vcm1hbEYnLUkjbW9HRiQ2LVEiO0YnRj0vJSZmZW5jZUdRJmZhbHNlRicvJSpzZXBhcmF0b3JHRjEvJSlzdHJldGNoeUdGRS8lKnN5bW1ldHJpY0dGRS8lKGxhcmdlb3BHRkUvJS5tb3ZhYmxlbGltaXRzR0ZFLyUnYWNjZW50R0ZFLyUnbHNwYWNlR1EmMC4wZW1GJy8lJ3JzcGFjZUdRLDAuMjc3Nzc3OGVtRic=print(); # input placeholderLUklbXJvd0c2Iy9JK21vZHVsZW5hbWVHNiJJLFR5cGVzZXR0aW5nR0koX3N5c2xpYkdGJzYlLUkjbWlHRiQ2JVEld2l0aEYnLyUnaXRhbGljR1EldHJ1ZUYnLyUsbWF0aHZhcmlhbnRHUSdpdGFsaWNGJy1JKG1mZW5jZWRHRiQ2JC1GIzYjLUYsNiVRK1N0YXRpc3RpY3NGJ0YvRjIvRjNRJ25vcm1hbEYnLUkjbW9HRiQ2LVEiOkYnRj0vJSZmZW5jZUdRJmZhbHNlRicvJSpzZXBhcmF0b3JHRkUvJSlzdHJldGNoeUdGRS8lKnN5bW1ldHJpY0dGRS8lKGxhcmdlb3BHRkUvJS5tb3ZhYmxlbGltaXRzR0ZFLyUnYWNjZW50R0ZFLyUnbHNwYWNlR1EsMC4yNzc3Nzc4ZW1GJy8lJ3JzcGFjZUdGVA==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print(); # input placeholderLUklbXJvd0c2Iy9JK21vZHVsZW5hbWVHNiJJLFR5cGVzZXR0aW5nR0koX3N5c2xpYkdGJzYjLUkjbWlHRiQ2I1EhRic=
<Text-field style="Heading 1" layout="Heading 1">Problem 1</Text-field>Find the mode (the value of the independent variable with the highest probability) of the lognormal probability density function. (Use parameters \316\274 and \317\203.)LUklbXJvd0c2Iy9JK21vZHVsZW5hbWVHNiJJLFR5cGVzZXR0aW5nR0koX3N5c2xpYkdGJzYkLUkjbWlHRiQ2JVEocmVzdGFydEYnLyUnaXRhbGljR1EldHJ1ZUYnLyUsbWF0aHZhcmlhbnRHUSdpdGFsaWNGJy1JI21vR0YkNi1RIjtGJy9GM1Enbm9ybWFsRicvJSZmZW5jZUdRJmZhbHNlRicvJSpzZXBhcmF0b3JHRjEvJSlzdHJldGNoeUdGPS8lKnN5bW1ldHJpY0dGPS8lKGxhcmdlb3BHRj0vJS5tb3ZhYmxlbGltaXRzR0Y9LyUnYWNjZW50R0Y9LyUnbHNwYWNlR1EmMC4wZW1GJy8lJ3JzcGFjZUdRLDAuMjc3Nzc3OGVtRic=LUklbXJvd0c2Iy9JK21vZHVsZW5hbWVHNiJJLFR5cGVzZXR0aW5nR0koX3N5c2xpYkdGJzYlLUkjbWlHRiQ2JVEld2l0aEYnLyUnaXRhbGljR1EldHJ1ZUYnLyUsbWF0aHZhcmlhbnRHUSdpdGFsaWNGJy1JKG1mZW5jZWRHRiQ2JC1GIzYjLUYsNiVRK1N0YXRpc3RpY3NGJ0YvRjIvRjNRJ25vcm1hbEYnLUkjbW9HRiQ2LVEiOkYnRj0vJSZmZW5jZUdRJmZhbHNlRicvJSpzZXBhcmF0b3JHRkUvJSlzdHJldGNoeUdGRS8lKnN5bW1ldHJpY0dGRS8lKGxhcmdlb3BHRkUvJS5tb3ZhYmxlbGltaXRzR0ZFLyUnYWNjZW50R0ZFLyUnbHNwYWNlR1EsMC4yNzc3Nzc4ZW1GJy8lJ3JzcGFjZUdGVA==print(); # input 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
Note very carefully that Maple uses different parameters than I do! I define the lognormal in terms of the parameters \316\274 and \317\203^2, but Maple uses the parameters \316\274 and \317\203 to define the same distribution.
So be careful to get the distribution you really want!
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<Text-field style="Heading 1" layout="Heading 1">Problem 2</Text-field>A call option on a stock is said to be in the money if the value of the stock is higher than the strike price, so that selling or exercising the call option would result in a profit (ignoring transaction costs.) Consider a stock (or more properly an index fund) whose value S(t) is described by the stochastic differential equation
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
corresponding to a non-zero compounded growth and pure market fluctuations proportional to the stock value and has a current market price of LUklbXJvd0c2Iy9JK21vZHVsZW5hbWVHNiJJLFR5cGVzZXR0aW5nR0koX3N5c2xpYkdGJzYkLUklbXN1YkdGJDYlLUkjbWlHRiQ2JVEiekYnLyUnaXRhbGljR1EldHJ1ZUYnLyUsbWF0aHZhcmlhbnRHUSdpdGFsaWNGJy1GIzYlLUkjbW5HRiQ2JFEiMEYnL0Y2USdub3JtYWxGJ0YyRjUvJS9zdWJzY3JpcHRzaGlmdEdGPUY+? What is the probability that a call option is in the money based on a strike price K = 1.25 LUklbXJvd0c2Iy9JK21vZHVsZW5hbWVHNiJJLFR5cGVzZXR0aW5nR0koX3N5c2xpYkdGJzYkLUklbXN1YkdGJDYlLUkjbWlHRiQ2JVEiekYnLyUnaXRhbGljR1EldHJ1ZUYnLyUsbWF0aHZhcmlhbnRHUSdpdGFsaWNGJy1GIzYlLUkjbW5HRiQ2JFEiMEYnL0Y2USdub3JtYWxGJ0YyRjUvJS9zdWJzY3JpcHRzaGlmdEdGPUY+ at expiration LUklbXJvd0c2Iy9JK21vZHVsZW5hbWVHNiJJLFR5cGVzZXR0aW5nR0koX3N5c2xpYkdGJzYlLUkjbWlHRiQ2JVEiVEYnLyUnaXRhbGljR1EldHJ1ZUYnLyUsbWF0aHZhcmlhbnRHUSdpdGFsaWNGJy1JI21vR0YkNi1RIn5GJy9GM1Enbm9ybWFsRicvJSZmZW5jZUdRJmZhbHNlRicvJSpzZXBhcmF0b3JHRj0vJSlzdHJldGNoeUdGPS8lKnN5bW1ldHJpY0dGPS8lKGxhcmdlb3BHRj0vJS5tb3ZhYmxlbGltaXRzR0Y9LyUnYWNjZW50R0Y9LyUnbHNwYWNlR1EmMC4wZW1GJy8lJ3JzcGFjZUdGTEY5time units later? Evaluate for LUklbXJvd0c2Iy9JK21vZHVsZW5hbWVHNiJJLFR5cGVzZXR0aW5nR0koX3N5c2xpYkdGJzYmLUkjbWlHRiQ2I1EhRictRiM2KC1GLDYlUSJLRicvJSdpdGFsaWNHUSV0cnVlRicvJSxtYXRodmFyaWFudEdRJ2l0YWxpY0YnLUkjbW9HRiQ2LVEiPUYnL0Y4USdub3JtYWxGJy8lJmZlbmNlR1EmZmFsc2VGJy8lKnNlcGFyYXRvckdGQi8lKXN0cmV0Y2h5R0ZCLyUqc3ltbWV0cmljR0ZCLyUobGFyZ2VvcEdGQi8lLm1vdmFibGVsaW1pdHNHRkIvJSdhY2NlbnRHRkIvJSdsc3BhY2VHUSwwLjI3Nzc3NzhlbUYnLyUncnNwYWNlR0ZRLUkjbW5HRiQ2JFElMS4yNUYnRj4tRjs2LVExJkludmlzaWJsZVRpbWVzO0YnRj5GQEZDRkVGR0ZJRktGTS9GUFEmMC4wZW1GJy9GU0Zmbi1JJW1zdWJHRiQ2JS1GLDYlUSJ6RidGNEY3LUYjNiUtRlU2JFEiMEYnRj5GNEY3LyUvc3Vic2NyaXB0c2hpZnRHRmJvRj5GK0Y+, 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, LUklbXJvd0c2Iy9JK21vZHVsZW5hbWVHNiJJLFR5cGVzZXR0aW5nR0koX3N5c2xpYkdGJzYmLUkjbWlHRiQ2I1EhRictRiM2JkYrLUYjNiYtRiw2JVEickYnLyUnaXRhbGljR1EldHJ1ZUYnLyUsbWF0aHZhcmlhbnRHUSdpdGFsaWNGJy1JI21vR0YkNi1RIj1GJy9GOlEnbm9ybWFsRicvJSZmZW5jZUdRJmZhbHNlRicvJSpzZXBhcmF0b3JHRkQvJSlzdHJldGNoeUdGRC8lKnN5bW1ldHJpY0dGRC8lKGxhcmdlb3BHRkQvJS5tb3ZhYmxlbGltaXRzR0ZELyUnYWNjZW50R0ZELyUnbHNwYWNlR1EsMC4yNzc3Nzc4ZW1GJy8lJ3JzcGFjZUdGUy1JI21uR0YkNiRRJTAuMDRGJ0ZARkBGK0ZARitGQA==, and LUklbXJvd0c2Iy9JK21vZHVsZW5hbWVHNiJJLFR5cGVzZXR0aW5nR0koX3N5c2xpYkdGJzYmLUkjbWlHRiQ2I1EhRictRiM2JkYrLUYjNiYtRiw2JVEnJiM5NjM7RicvJSdpdGFsaWNHUSZmYWxzZUYnLyUsbWF0aHZhcmlhbnRHUSdub3JtYWxGJy1JI21vR0YkNi1RIj1GJ0Y5LyUmZmVuY2VHRjgvJSpzZXBhcmF0b3JHRjgvJSlzdHJldGNoeUdGOC8lKnN5bW1ldHJpY0dGOC8lKGxhcmdlb3BHRjgvJS5tb3ZhYmxlbGltaXRzR0Y4LyUnYWNjZW50R0Y4LyUnbHNwYWNlR1EsMC4yNzc3Nzc4ZW1GJy8lJ3JzcGFjZUdGUC1JI21uR0YkNiRRJTAuMTBGJ0Y5RjlGK0Y5RitGOQ== and also for LUklbXJvd0c2Iy9JK21vZHVsZW5hbWVHNiJJLFR5cGVzZXR0aW5nR0koX3N5c2xpYkdGJzYmLUkjbWlHRiQ2JVEiS0YnLyUnaXRhbGljR1EldHJ1ZUYnLyUsbWF0aHZhcmlhbnRHUSdpdGFsaWNGJy1JI21vR0YkNi1RIj1GJy9GM1Enbm9ybWFsRicvJSZmZW5jZUdRJmZhbHNlRicvJSpzZXBhcmF0b3JHRj0vJSlzdHJldGNoeUdGPS8lKnN5bW1ldHJpY0dGPS8lKGxhcmdlb3BHRj0vJS5tb3ZhYmxlbGltaXRzR0Y9LyUnYWNjZW50R0Y9LyUnbHNwYWNlR1EsMC4yNzc3Nzc4ZW1GJy8lJ3JzcGFjZUdGTC1JJW1zdWJHRiQ2JS1GLDYlUSJ6RidGL0YyLUYjNiUtSSNtbkdGJDYkUSIwRidGOUYvRjIvJS9zdWJzY3JpcHRzaGlmdEdGWkY5 with the same parameters.
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print(); # input 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print(); # input 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(); # input 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print(); # input placeholderLUklbXJvd0c2Iy9JK21vZHVsZW5hbWVHNiJJLFR5cGVzZXR0aW5nR0koX3N5c2xpYkdGJzYjLUkjbWlHRiQ2I1EhRic=See the full solution derivation to see how to express the probability that the stock is in the money expressed in terms of the Standard Normal CDF. The calculation is:
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<Text-field style="Heading 1" layout="Heading 1">Problem 3</Text-field>What is the price of a European call option on a non-dividend-paying stock when the stock price is $52, the strike price is $50, the risk-free interest rate is 12% per annum (compounded continuously), the volatility is 30% per annum, and the time to maturity is 3 months?LUklbXJvd0c2Iy9JK21vZHVsZW5hbWVHNiJJLFR5cGVzZXR0aW5nR0koX3N5c2xpYkdGJzYlLUkjbWlHRiQ2JVEld2l0aEYnLyUnaXRhbGljR1EldHJ1ZUYnLyUsbWF0aHZhcmlhbnRHUSdpdGFsaWNGJy1JKG1mZW5jZWRHRiQ2JC1GIzYjLUYsNiVRKGZpbmFuY2VGJ0YvRjIvRjNRJ25vcm1hbEYnLUkjbW9HRiQ2LVEiO0YnRj0vJSZmZW5jZUdRJmZhbHNlRicvJSpzZXBhcmF0b3JHRjEvJSlzdHJldGNoeUdGRS8lKnN5bW1ldHJpY0dGRS8lKGxhcmdlb3BHRkUvJS5tb3ZhYmxlbGltaXRzR0ZFLyUnYWNjZW50R0ZFLyUnbHNwYWNlR1EmMC4wZW1GJy8lJ3JzcGFjZUdRLDAuMjc3Nzc3OGVtRic=print(); # input 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(); # input 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print(); # input 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print(); # input 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(); # input 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print(); # input placeholderLUklbXJvd0c2Iy9JK21vZHVsZW5hbWVHNiJJLFR5cGVzZXR0aW5nR0koX3N5c2xpYkdGJzYpLUkjbWlHRiQ2JVEmUGhpZDFGJy8lJ2l0YWxpY0dRJXRydWVGJy8lLG1hdGh2YXJpYW50R1EnaXRhbGljRictSSNtb0dGJDYtUSJ+RicvRjNRJ25vcm1hbEYnLyUmZmVuY2VHUSZmYWxzZUYnLyUqc2VwYXJhdG9yR0Y9LyUpc3RyZXRjaHlHRj0vJSpzeW1tZXRyaWNHRj0vJShsYXJnZW9wR0Y9LyUubW92YWJsZWxpbWl0c0dGPS8lJ2FjY2VudEdGPS8lJ2xzcGFjZUdRJjAuMGVtRicvJSdyc3BhY2VHRkwtRjY2LVEqJmNvbG9uZXE7RidGOUY7Rj5GQEZCRkRGRkZIL0ZLUSwwLjI3Nzc3NzhlbUYnL0ZORlNGNS1GLDYlUSRDREZGJ0YvRjItSShtZmVuY2VkR0YkNiQtRiM2Ji1GLDYlUSJaRidGL0YyLUY2Ni1RIixGJ0Y5RjsvRj9GMUZARkJGREZGRkhGSi9GTlEsMC4zMzMzMzMzZW1GJ0Y1LUYsNiVRI2QxRidGL0YyRjktRjY2LVEiO0YnRjlGO0Zdb0ZARkJGREZGRkhGSkZUprint(); # input 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(); # input 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print(); # input placeholder
<Text-field style="Heading 1" layout="Heading 1">Problem 4</Text-field>What is the price of a European call option on a non-dividend paying stock when the stock price is $30, the exercise price is $29, the risk-free interest rate is 5%, the volatility is 25% per annum, and the time to maturity is 4 months?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print(); # input 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(); # input placeholderLUklbXJvd0c2Iy9JK21vZHVsZW5hbWVHNiJJLFR5cGVzZXR0aW5nR0koX3N5c2xpYkdGJzYjLUkjbWlHRiQ2I1EhRic=LUklbXJvd0c2Iy9JK21vZHVsZW5hbWVHNiJJLFR5cGVzZXR0aW5nR0koX3N5c2xpYkdGJzYlLUkjbWlHRiQ2I1EhRictRiM2KC1GLDYlUSNkMUYnLyUnaXRhbGljR1EldHJ1ZUYnLyUsbWF0aHZhcmlhbnRHUSdpdGFsaWNGJy1JI21vR0YkNi1RIn5GJy9GOFEnbm9ybWFsRicvJSZmZW5jZUdRJmZhbHNlRicvJSpzZXBhcmF0b3JHRkIvJSlzdHJldGNoeUdGQi8lKnN5bW1ldHJpY0dGQi8lKGxhcmdlb3BHRkIvJS5tb3ZhYmxlbGltaXRzR0ZCLyUnYWNjZW50R0ZCLyUnbHNwYWNlR1EmMC4wZW1GJy8lJ3JzcGFjZUdGUS1GOzYtUSomY29sb25lcTtGJ0Y+RkBGQ0ZFRkdGSUZLRk0vRlBRLDAuMjc3Nzc3OGVtRicvRlNGWEY6LUYsNiVRJmV2YWxmRidGNEY3LUkobWZlbmNlZEdGJDYkLUYjNiRGOi1JJm1mcmFjR0YkNigtRmhuNiQtRiM2Ki1GLDYlUSRsb2dGJy9GNUZCRj4tRmhuNiQtRiM2JEY6LUZdbzYoLUYsNiVRIlNGJ0Y0RjctRiM2Iy1GLDYlUSJLRidGNEY3LyUubGluZXRoaWNrbmVzc0dRIjFGJy8lK2Rlbm9tYWxpZ25HUSdjZW50ZXJGJy8lKW51bWFsaWduR0ZqcC8lKWJldmVsbGVkR0ZCRj5GOi1GOzYtUSIrRidGPkZARkNGRUZHRklGS0ZNL0ZQUSwwLjIyMjIyMjJlbUYnL0ZTRmNxRjotRmhuNiQtRiM2Jy1GLDYlUSJyRidGNEY3RjpGX3FGOi1GXW82KC1JJW1zdXBHRiQ2JS1GLDYlUSgmc2lnbWE7RidGZm9GPi1GIzYjLUkjbW5HRiQ2JFEiMkYnRj4vJTFzdXBlcnNjcmlwdHNoaWZ0R1EiMEYnRmRyRmVwRmhwRltxRl1xRj4tRjs2LVEnJnNkb3Q7RidGPkZARkNGRUZHRklGS0ZNRk9GUi1GaG42JC1GIzYjLUYsNiVRKFRtaW51c3RGJ0Y0RjdGPkY+LUYjNiYtRiw2JVEmc2lnbWFGJ0Zmb0Y+Rl1zLUkmbXNxcnRHRiQ2I0Zic0YrRmVwRmhwRltxRl1xRj4tRjs2LVEiO0YnRj5GQC9GREY2RkVGR0ZJRktGTUZPRlk=print(); # input 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print(); # input 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print(); # input 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(); # input 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(); # input 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print(); # input placeholder
<Text-field style="Heading 1" layout="Heading 1">Problem 5</Text-field>
<Text-field style="Heading 1" layout="Heading 1"></Text-field>LUklbXJvd0c2Iy9JK21vZHVsZW5hbWVHNiJJLFR5cGVzZXR0aW5nR0koX3N5c2xpYkdGJzYkLUkjbWlHRiQ2JVEocmVzdGFydEYnLyUnaXRhbGljR1EldHJ1ZUYnLyUsbWF0aHZhcmlhbnRHUSdpdGFsaWNGJy1JI21vR0YkNi1RIjtGJy9GM1Enbm9ybWFsRicvJSZmZW5jZUdRJmZhbHNlRicvJSpzZXBhcmF0b3JHRjEvJSlzdHJldGNoeUdGPS8lKnN5bW1ldHJpY0dGPS8lKGxhcmdlb3BHRj0vJS5tb3ZhYmxlbGltaXRzR0Y9LyUnYWNjZW50R0Y9LyUnbHNwYWNlR1EmMC4wZW1GJy8lJ3JzcGFjZUdRLDAuMjc3Nzc3OGVtRic=QyQ+SSNWMUc2IiomSSJBR0YlIiIiSSJTR0YlRihGKA==print(); # input placeholderPkkxYmxhY2tzY2hvbGVzVGVzdEc2IiwqLUklZGlmZkclKnByb3RlY3RlZEc2JEkjVjFHRiRJInRHRiQiIiIqKEkmc2lnbWFHRiQiIiNJIlNHRiRGLy1GJzYkLUYnNiRGKkYwRjBGLCNGLEYvKihJInJHRiRGLEYwRixGM0YsRiwqJkY3RixGKkYsISIiprint(); # input placeholderQyQ+SSNWMkc2IiomSSJBR0YlIiIiLUkkZXhwR0YlNiMqJkkickdGJUYoSSJ0R0YlRihGKEYoprint(); # input placeholderPkkxYmxhY2tzY2hvbGVzVGVzdEc2IiwqLUklZGlmZkclKnByb3RlY3RlZEc2JEkjVjJHRiRJInRHRiQiIiIqKEkmc2lnbWFHRiQiIiNJIlNHRiRGLy1GJzYkLUYnNiRGKkYwRjBGLCNGLEYvKihJInJHRiRGLEYwRixGM0YsRiwqJkY3RixGKkYsISIiprint(); # input placeholderJSFHJSFH
<Text-field style="Heading 1" layout="Heading 1">Problem 6</Text-field>Black Scholes theory does not apply. The Black-Scholes derivation explicitly assumes that the changes in price are continuous. Here the price will immediately change discontinuously by the amount $10.00.JSFH
<Text-field style="Heading 1" layout="Heading 1">Problem 7</Text-field>QyQ+SS5wdXRDYWxsUGFyaXR5RzYiLywmLUkiQ0dGJTYkSSJTR0YlSSJ0R0YlIiIiLUYrRiohIiIsJkYrRi0qJkkiS0dGJUYtLUkkZXhwRzYkJSpwcm90ZWN0ZWRHSShfc3lzbGliR0YlNiMsJC1JInJHRiU2IywmSSJUR0YlRi1GLEYvRi9GLUYvRi0=print(); # input placeholderQyQ+SS5kZWx0YVJlbGF0aW9uRzYiLUklZGlmZkclKnByb3RlY3RlZEc2JEkucHV0Q2FsbFBhcml0eUdGJUkiU0dGJSIiIg==print(); # input placeholderQyQ+SS5nYW1tYVJlbGF0aW9uRzYiLUklZGlmZkclKnByb3RlY3RlZEc2JUkucHV0Q2FsbFBhcml0eUdGJUkiU0dGJUYrIiIiprint(); # input placeholderJSFHJSFH