The current price of a nondividend-paying stock is 40 and the continuously compounded risk-free interest rate is 8%. You enter into a short position on 3 call options, each with 3 months to maturity, a strike price of 35, and an option premium of 6.13. Simultaneously, you enter into a long position on 5 call options, each with 3 months to maturity, a strike price of 40, and an option premium of 2.78.

All 8 options are held until maturity.

Calculate the maximum possible profit and the maximum possible loss for the entire option portfolio.

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(A) (B) (C) (D) (E) Maximum Profit 3.42 4.58 Unlimited 4.58 Unlimited Maximum Loss 4.58 10.42 10.42 Unlimited Unlimited