5. (Providing downside protection - Writing a covered call) Today is December 7, 2015. Suppose that you decide to write a covered call on 100 shares of Merck (MRK) common stock that you bought today. You plan to write one April 2016 call option with a strike price of K $52.50. You have the following information. (All prices are per share.) Merck's stock price today: $53.68 Merck does not pay dividends. Premium on this call option is $3.40 per share. This option expires mid-April. Time to expiration is approximately 4 months. LIBOR is 0.4% per annum for this period. At expiration of the call option, the stock price is $58 per share. (a) What is your total profit or loss? ($222) (b) What is your 4-month rate of return ofthis strategy? (4.42%) (c) What is the 4-month rate of return without options? (8.05%) (d) What does the answers from (c) and (d) tell you? (Go figure) (Assume that all positions are held open until expiration.) (Assume that all positions are held open until expiration.) Do not round values at intermediate steps in your calculations c = 3.40, So = 53.68, K = 52.5, T = 4/12, r = 0.04, ST-58