2. Consider a stock currently trading at $40. There is a call and a put option available at exercise price of 40 and a time to expiration of six months. The call is priced at $3.25, and the put at $2.25. There are no dividends on the stock and the option is European. Use this information to answer the following questions. a. Suppose the investor constructed a covered call position. At expiration the stock price is \$27. What is the investor's profit (loss)? What is the maximum profit from the transaction? What is the breakeven stock price at expiration for the transaction? b. Suppose the investor constructed a protective put (long the stock, long the put) position. At expiration the stock price is \$27. What is the investor's profit (loss)? What is the maximum profit from the transaction? What is the breakeven stock price at expiration for the transaction? c. Now suppose the investor takes a short position in a straddle using the 40 put and 40 call above. At expiration in 6 months, stock is trading at $12 a share. What is the profit (loss) for this strategy? What is (are) the breakeven price (s) for this strategy? What is the overall motivation for taking a short position in a straddle position? d. Given the provided information and relevant results obtained in part c, calculate the breakeven implied annual volatility for this straddle contract. If you plan to take a long position on this strategy, how would you use the calculated implied volatility measure in making your decision? Explain