1) An option strategy called the iron butterfly is illustrated in the payoff diagram below. Iron butterfly 5 .5 45 50 ST 60 (a) How could you generate the iron butterfly using only call and put options? (b) How could you generate the iron butterfly using only call options and bonds? (c) The premiums of some relevant options written on S are given in the table below. Draw a profit diagram for the iron butterfly. Type X T-t Premium Put 45 1 Call 45 1 Put 50 1 Call 50 1 Put 55 1 Call 55 1 $1.876 $9.070 $3.730 $6.168 $6.331 $4.013 (d) What market views could lead you to buy an iron butterfly? (e) What is the risk-free (continuously compounded) interest rate, ? (f) What is the current stock price, S,? 1) An option strategy called the iron butterfly is illustrated in the payoff diagram below. Iron butterfly 5 .5 45 50 ST 60 (a) How could you generate the iron butterfly using only call and put options? (b) How could you generate the iron butterfly using only call options and bonds? (c) The premiums of some relevant options written on S are given in the table below. Draw a profit diagram for the iron butterfly. Type X T-t Premium Put 45 1 Call 45 1 Put 50 1 Call 50 1 Put 55 1 Call 55 1 $1.876 $9.070 $3.730 $6.168 $6.331 $4.013 (d) What market views could lead you to buy an iron butterfly? (e) What is the risk-free (continuously compounded) interest rate, ? (f) What is the current stock price, S