Given the following:
Price of the stock ........... $26
Price of a six-month call at $25 ......... 2
Price of a six-month call at $30 ......... 4
An investor buys the $25 call and sells the $30 call. What are the profits if the stock’s price at expiration is $20, $25, $30, or $35? Arbitrage implies what about the price of the call with the higher strike price?