Question: 20. Use the same assumptions as in the preceding problem, without the bid-ask spread. Suppose that we want to construct a paylater strategy using a

20. Use the same assumptions as in the preceding problem, without the bid-ask spread.

Suppose that we want to construct a paylater strategy using a ratio spread. Instead of buying a 440-strike call, Auric will sell one 440-strike call and use the premium to buy two higher-strike calls, such that the net option premium is zero.

a. What higher strike for the purchased calls will generate a zero net option premium?

b. Graph the profit for Auric resulting from this strategy.

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