Question: You observe the following data on different options. What are the profits you would earn for every possible price of the underlying stock at the

You observe the following data on different options. What are the profits you would earn for every possible price of the underlying stock at the exercise date for each of the following strategies?

a. Using arbitrage arguments rank the prices of the calls.
b. Buy one call with an exercise price of $40 and buy one share.
c. Buy two calls with a strike price of $70 and short sell one share.
d. Write two calls with a strike price of $30 and buy oneshare.

Security Current price Strike price 50 C1 C2 C3 C4 IBL Stock Call Call Call Call 60 70 40 30

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