Question: Consider the previous problem. Assume the firm thinks the initial cost of call options is too high. The firm considers alternatives to reduce the hedging

Consider the previous problem. Assume the firm thinks the initial cost of call options is too high. The firm considers alternatives to reduce the hedging costs. Discuss how the firms could reduce hedging costs through a collar. Assume there is a put option on the 6-month T-bill with 6-month maturity and a strike price of $94.00 (per $100 face value) and $0.16 premium. Draw the payoff diagram for the collar.

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