Use the Wall Street Journal listing below to answer this question.

Consider the following options portfolio: You buy a July 2017 expiration call option on MICROSOFT with exercise price $74. You also buy a July 2017 expiration MICROSOFT put option with exercise price $72.

1. Graph the payoff of this portfolio at option expiration as a function of MICROSOFTs stock price at that time.

2. What will be the profit/loss on this position if MICROSOFT is selling at $70 on the option expiration date? What if MICROSOFT is selling at $77?

3. At what two stock prices will you just break even on your investment?

4. What kind of bet are you making; that is, what must you believe about MICROSOFTs stock price to justify this position?

Microsoft (MSFT) Expiration June 16, 2017 June 16, 2017 June 16, 2017 Strike 70 72 74 Underlying stock price = $71.75 Call Put 2.02 0.24 0.67 0.90 0.13 2.37 July 7, 2017 July 7, 2017 July 7, 2017 72 74 2.40 1.15 | 0.42 0.58 1.32 | 2.59 |