5. A trader buys a call option with a strike price of $45 and a put option with a strike price of $40. Both options have the same maturity. The call costs $3 and the put costs $4. Draw a diagram showing the variation of the trader's profit with the asset price. 6. Explain why an American option is always worth at least as much as a European option on the same asset with the same strike price and exercise date. 7. Explain why an American option is always worth at least as much as its intrinsic value. 8. Explain carefully the difference between writing a put option and buying a call option. 9. The treasurer of a corporation is trying to choose between options and forward contracts to hedge the corporation's foreign exchange risk. Discuss the advantages and disadvantages of each. 10. Consider an exchange-traded call option contract to buy 500 shares with a strike price of $40 and maturity in 4 months. Explain how the terms of the option contract change when there is: (a) a 10% stock dividend; (b) a 10% cash dividend; and (c) a 4-for-1 stock split. Include Intext citations and references