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1. a) Explain the difference between an option spread and combination. (20 marks) b) Illustrate how a butterfly spread is constructed using either puts or

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1. a) Explain the difference between an option spread and combination. (20 marks) b) Illustrate how a butterfly spread is constructed using either puts or calls. (40 marks) c) Demonstrate, using a numerical example, the range of potential payoffs and profits from the butterfly spread. (40 marks)

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