By combining two short puts at a middle strike K2, and one long put each at a lower K and upper K3 strike, one creates a long put butterfly spread. All options have the same expiry date. Consider a butterfly spread using European put options for a non- dividend paying stock, where the following information is given: The current stock price is $20, The put option with strike price K= 15, The put option with strike price K= 20 and The put option with strike price K3 = 25, The interest rate is 2% p.a. continuously compounded, Annual volatility is 30% and The time to maturity for all options is 6 months. Required a) Calculate the price of the above butterfly spread. The calculate the price of a butterfly spread created with call options with strikes K= 15, K= 20 and K3= 25, respectively. Which of those two butterfly spreads is more expensive? (4 marks) b) Construct tables presenting the profit and payoff for the inversed butterfly spread created from the above described put options. Discuss the best scenario in terms of payoff for an investor who buys the inversed butterfly spread. (4 marks) By combining two short puts at a middle strike K2, and one long put each at a lower K and upper K3 strike, one creates a long put butterfly spread. All options have the same expiry date. Consider a butterfly spread using European put options for a non- dividend paying stock, where the following information is given: The current stock price is $20, The put option with strike price K= 15, The put option with strike price K= 20 and The put option with strike price K3 = 25, The interest rate is 2% p.a. continuously compounded, Annual volatility is 30% and The time to maturity for all options is 6 months. Required a) Calculate the price of the above butterfly spread. The calculate the price of a butterfly spread created with call options with strikes K= 15, K= 20 and K3= 25, respectively. Which of those two butterfly spreads is more expensive? (4 marks) b) Construct tables presenting the profit and payoff for the inversed butterfly spread created from the above described put options. Discuss the best scenario in terms of payoff for an investor who buys the inversed butterfly spread. (4 marks)