10. Consider the following option strategy, which consists only of calls:

a. Draw the profit diagram for this strategy.

b. The prices given include one violation of an arbitrage condition. Identify this violation and explain.

[9]This is a very fundamental fact of finance: If a financial strategy has future payoffs that are identically zero, then its current cost must also be zero. Likewise, if a financial strategy has future payoffs that are nonnegative, then its current cost must be less than or equal to zero.