Question: 1. Consider a stock worth $49. A call with an exercise price of $50 cost $6.25 and a put with an exercise price of $50

1. Consider a stock worth $49. A call with an exercise price of $50 cost $6.25 and a put with an exercise price of $50 costs $5.875. An investor buys a straddle.

Determine the value at expiration and profit under the following outcomes:

i. The price of the stock at expiration is $61.

ii. The price of the stock at expiration is $37.

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