You are given: (i) An investor short-sells a nondividend-paying stock that has a current price of 44

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You are given:

(i) An investor short-sells a nondividend-paying stock that has a current price of 44 per share.

(ii) This investor also writes a collar on this stock consisting of a 40-strike European put option and a 50-strike European call option. Both options expire in one year.

(iii) The prices of the options on this stock are:

Strike Price Call option Put option 8.42 2.47 3.86 7.42 40 50

(iv) The continuously compounded risk-free interest rate is 5%.

(v) Assume there are no transaction costs.

Calculate the maximum profit for the overall position at expiration.

(A) 2.61

(B) 3.37

(C) 4.79

(D) 5.21

(E) 7.39

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