Question: Mixing options and securities can often create interesting payoffs. For each of the following combinations show what the payoff would be when the option expires

Mixing options and securities can often create interesting payoffs. For each of the following combinations show what the payoff would be when the option expires if (i) the stock price is below the exercise price, and (ii) the stock price is above the exercise price. Assume that each option has the same exercise price and expiration date.

a. Buy a call and invest the present value of the exercise price in a bank deposit.

b. Buy a share and a put option on the share.

c. Buy a share, buy a put option on the share, and sell a call option on the share.

d. Buy a call option and a put option on the share.

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