A straddle occurs when an investor purchases both a call option and a put option. Such a strategy makes sense when the investor expects a major price movement but is unsure of the direction. Given the following information:

Price of Stock: $50

Price of 6-month call at $50: $5

Price of 6-month put at $50: $3.50

Assume that you establish a straddle at these prices (i.e. you buy one of each position).

1. What is the profit or loss on the position if the price of the stock is $60 at the expiration date?
2. What is the profit or loss on the position if the price of the stock is $40 at the expiration date?
3. What is the profit or loss on the position if the price of the stock is $50 at the expiration date?