(18) Construct a BULL Spread with 2 CALLS, having K= 18 and 22. The stock price is around $20.

The Option Price is $ 5 if K=18 , and the price is $ 3.50 if K=22.

1. Draw the Profit Diagram, labeling appropriate points.
2. In words state exactly what positions you take in the 2 options.
3. What is your upfront NET Cost or Inflow (clearly indicate which it is) ?
4. Compute the Maximum Profit, and indicate for what stock prices it is attained.
5. Compute the Max. Loss (or Min. Profit), and indicate for what stock prices it is attained.
6. Determine the Breakeven stock price at T.