10. Melissa Simmons is the chief investment officer of a hedge fund

specializing in options trading. She is currently back-testing various option

trading strategies that will allow her to profit from large fluctuationseither

up or downin a stock's price. An example of such typical trading strategy is

straddle strategy that involves the combination of a long call and a long put

with an identical strike price and time to maturity. She is considering the

following pricing information on securities associated with Friendwork, a new

Internet start-up hosting a leading online social network:

Friendwork stock: $100

Call option with an exercise price of $100 expiring in one year: $9

Put option with an exercise price of $100 expiring in one year: $8

a. Use the above information on Friendwork and draw a diagram showing

the net profit/ loss position at maturity for the straddle strategy. Clearly label

on the graph the break- even points of the position.