Adam Smith just purchased 700 shares of AT&E at 553 96, and he has decided to write covered calls against these stocks Accordingly, he sells 7 AT&E calls at their current market price of 5476 The calls have 3 months to expiration and carry a strike price of $57 00 The stock pays a quarterly dividend of 50.48 a share the next dividend to be paid in about a month) a. Determine the total profit and holding period return Adam will generate if the stock rises to $5700 a share by the expiration date on the calls b. What happens to Adam's profit (and return) if the price of the stock rises to more than $5700 a share? c. Does this covered call position offer any protection (or cushion) against a drop in the price of the stock. Explain a. If the stock rises to 55700 a share by the expiration date on the calls the total profit is $(Round to the nearest cent) The total holding period return is % (Round to two decimal places) b. What happens to Adam's profit (and return) of the price of the stock nses to more than $57 00 a sharo? (Select the best answer below) O A. For any price above $57.00 the loss on the call option will suppress the additional capital gains made on the long position in the stock, Jeaving zero profit The HPR will also be zero OB. For any price above $57 00, the loss on the call option will exceed the additional capital gains made on the long position in the stock leaving the profit unchanged. The HPR also remains the same OC. For any price above $5700, the loss on the call option will be offset exactly by the additional capital gains made on the long position in the stock, leaving the profit unchanged Tho HPR also remains the same OD. For any price above $57 00, the gain on the call option will be offset exactly by the capital loss made on the long position in the stock leaving the profit unchanged. The HPR also romains the same c. Does this covered Call position offer any protection (or cushion) against a drop in the price of the stock? Explain (Select the best answer below) O A. The covered call position offers limited protection against a drop in stock prica Tho capital loss on the stock can be protected to the extent of tho option premium received OB. The covered call position offers total protection against a drop in stock price. The capital loss on the stock will be fully protected OC. The covered coll position offers no protection against a drop in stock price. The capital loss on the stock can not be protected by the option premium received OD. The covered call position offers limited protection against an increase in stock price. The capital loss on the stock can be protected to the extent of the option premium received