Can you answer question 2 & 4 for me please, I've attached the problem set.

Prof. PIRIM Spring 2016, Session II Options and Futures I (BusFin 4230 ) Problem Set 2: Call and Put Option Contract This problem set is due at the beginning of class on Thursday, March 31st, 2016. Hand in only one solution per group. Question 1 (10 Points) Explain and show on a diagram the profit at maturity from the following combinations of positions. Please show the profit from each option or stock and the profit from the combined position on ONE graph. You should have one graph each for a, b, and c. Please label carefully all turning points and profit levels. To find the future value, use continuous compounding, where r, risk-free interest is 0.01 and time to maturity, T is 0.0417. All options expire at the same time, at T=0.0417. You can use ranges of $65, 66, 67, 68, 69...........$82 for DELL stock price at maturity. DELL Stock Price Strike Expiration Call Premium Put premium 71.76 70 Sep 2.25 0.45 71.76 75 Sep 0.10 3.40 71.76 80 Sep 0.05 8.30 a) Buy one 70 Sep call and buy one 80 Sep Put b) Buy one 70 Sep put, buy one 80 Sep put, and short a round lot (100 shares) of the underlying stock c) Buy one 75 Sep call and sell one 75 Sep put option. 1 Question 2 (5 Points) A trader buys a European call option and sells a European put option. The options have the same underlying asset, strike price, and maturity. Describe the trader's position. Under what circumstances does the price of the call equal the price of the put? Question 3 (5 Points) Suppose that call options on a stock with strike prices of $35 and $40 cost $3.40 and $1.40, respectively and expiration is in 4 months. How can the options be used to create a) a bull spread and b) a bear spread? Construct a table that shows the profit and payoff for both spreads. Draw the bull and bread spread profit diagram. (Ignore time value of money). Question 4 (5 Points) A call with a strike price of $60 costs $6. A put with the same strike price and expiration date costs $4. Construct a table that shows the profit from a straddle. For what range of stock prices would the straddle lead to a loss? (Ignore time value of money). 2