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6. Bob purchases a 50-strike put option and a 50-strike call option for the same underlying stock, and time to maturity T = 1 year.

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6. Bob purchases a 50-strike put option and a 50-strike call option for the same underlying stock, and time to maturity T = 1 year. The current price of the put option is $1.00 and the current price of the call option is $2.00. Assume the risk-free interest rate is r-5%. (a) Determine the future value of the initial cost. (b) Find the profit as a function of the spot price at expiration Sr. (c) Find the values of the spot price at expiration at which Bob makes a profit. (d) Draw the profit diagram

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