2. The current price of a non-dividend paying stock is 34 and the continuously compounded annual risk- free rate of return is 3%. The following table shows 6-month call and put option premiums for various exercise prices: Strike Call Premium Put Premium 29 6.20 0.76 34 3.11 2.60 39 1.34 5.76 A trader interested in speculating on volatility in the stock price is considering two investment strategies. The first is a 34-strike purchased straddle. The second is a purchased strangle consisting of a 29-strike put and a 39-strike call. a) Draw the payoff diagrams for the two strategies. b) Draw the profit diagrams for the two strategies. c) Determine the range(s) of stock prices in 6 months for which the straddle outperforms the strangle. 2. The current price of a non-dividend paying stock is 34 and the continuously compounded annual risk- free rate of return is 3%. The following table shows 6-month call and put option premiums for various exercise prices: Strike Call Premium Put Premium 29 6.20 0.76 34 3.11 2.60 39 1.34 5.76 A trader interested in speculating on volatility in the stock price is considering two investment strategies. The first is a 34-strike purchased straddle. The second is a purchased strangle consisting of a 29-strike put and a 39-strike call. a) Draw the payoff diagrams for the two strategies. b) Draw the profit diagrams for the two strategies. c) Determine the range(s) of stock prices in 6 months for which the straddle outperforms the strangle