We are now at time 0. We are given the following securities:
XYZ stock. The time-0 price is S(0).
A T-expiration European call on XYZ with strike price $15. The time-0 price is c(0,T, 15).
A T-expiration European call on XYZ with strike price $20. The time-0 price is c(0, T, 20).
Consider two possible positions:
Position 1: Sell four 15-strike calls and buy three 20-strike calls.
Position 2: Sell the stock short.
For each position, plot the time-T payoff (only) as a function of the stock price at expiration. Plot the two payoffs on the same graph, for 0 Mark the important points. Your graph may rely on a numerical table or on an algebraic table, but there is no need to provide such an explanation. (You can just do it by hand. It does not have to be fancy.)

(b) By comparing the two payoffs on the graph, infer a relationship between the above time-0 prices.
Explain briefly.