USE THE INFORMATION GIVEN BELOW TO ANSWER QUESTIONS 1-2.

The Wall Street Journal reported the following prices for Microsoft options for trading on Friday, February 7 2010. The stock itself closed at $50.75.

Calls (Prices in $)
Strike Price	February	March	April	July
45	6.625	7.5	8	10.5
50	2.8125	4.75	5.875
55	1.0625	2.625	3.75	6
60	0.4375	1.3125	1.875	4.25
65	0.1875	0.625	1.25
70	0.0625
Puts (Prices in $)
Strike Price	February	March	April	July
45	1	1.8125	2.625	4.25
50	2.375	4	5
55	5.375	7.625	8.125	8.75
60	9.75	10.875	12.5
65	15.5	16.5	16.75
70	20.75

1) If the risk free rate of interest (continuously compounded) is 5%, then does put- call parity hold for the April options with X=K=$50, and X=K=$65 (calculations based on 71 days to maturity, 365 day year)?

2a) Construct a payoff diagram for buying a $50 April call option on Microsoft. Construct the diagrams for net payoffs, i. e. after deducting the option premium.

2b) Construct a payoff diagram for writing a $50 April call option on Microsoft and for writing a $50 April put option (combined). Construct the diagrams for net payoffs, i. e. after adding the option premium.