Question: Three call options on a stock have the same expiration date and strike prices of $55, $60, and $65. The market prices are $8, $5,

Three call options on a stock have the same expiration date and strike prices of $55, $60, and $65. The market prices are $8, $5, and $3, respectively.

a. Explain how a butterfly spread can be created. Construct a table.

b. Compute and clearly mark the breakeven points on the graph.

c. Plot a graph of the final profits (after excluding cost) from the strategy (Y axis) for a closing stock price range of $40 to $80 in increments of $5, on the X-axis.

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