1.The common stock of Company XYZ is currently trading at a price of $42. Both a put and a call option are available for XYZ stock, each having an exercise price of $40 and an expiration date of exactly six months. The current market prices for the put and call are $1.45 and $3.90, respectively. The risk-free holding period return for the next six months is 4 percent, which corresponds to an 8 percent annual rate.

A.For each possible stock price in the following sequence,25, 30, 35, 40, 45, 50, 55, 60, calculate& Draw graph (where possible) the expiration date payoffs, Initial Derivatives Premium & Net Profit (net of the initial purchase price) for the following positions: (1) buy one XYZ call option, (2) short one XYZ call option, (3) buy one XYZ put option, (4) short one XYZ put option, (5) Long position forward XYZ, and (6) Short position Forward XYZ.

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