6. Equity Collar (Easy-Medium, 20 points) One option trading strategy we have not dis- cussed is the equity collar. It involves buying the underlying stock, buying a put option at strike price K (the "floor") and writing a call option at strike price K2 (the "cap"). The two options. have the same expiration dates, and it is assumed that K > K. Assume that all options are European and that the stock does not pay any dividends. As always, let So denote the stock price today, T denote the years to expiration of the options, ST denote the stock price at expiration, and r denote the risk-free rate from today to expiration expressed per annum with continuous compounding. (a) (5 points) Draw the payoff (not profit) function. (b) (10 points) Let a = So + p(K1) - c(K2) denote the price of this portfolio, i.e., the price of buying the stock, buying a put option at strike K, and selling a call option at strike K2 K. Find bounds a < a