A stock is currently trading for $$25$ per share and an investor is interested in the following two options with a one$-$year expiration term.

Options Call Put

Strike Price $$28$ $$24$

Quoted Price $$2$

$$4$

a$)$ Calculate the intrinsic values of the call and put.

b$)$ Draw the profit diagram for a short position in the put option described above. Label

the diagram well. Show all the critical points on the diagram. For example, the intercepts on axes, maximum profit or maximum loss. What price movements are required for the investor to have a positive profit?

c$)$ Draw the profit diagram for a long position in the call option. And label the diagram well.

d$)$ Suppose one month later, the stock price moves up to $$30$ per share, how will the prices of the call and put change? Why? Briefly explain.

e$)$ Suppose an investor purchased $10$ contracts of the $28$ calls and sold $10$ contracts of the $24$ puts. If the stock price turns out to be $$30$ per share in one month, what is the total profit for this investor?