answer the red high light question

5.3 Butterfly spread The stock price is S 100. The dividend yield is q = 1%. The volatility is 45%. The risk-free interest rate is Y-5%. The current time is t 0 and the expiration time is T 1. Create a butterfly spread using European call options with a spacing of K: (5.9) . Set K = 1 below. The value of the butterfly spread is small, so let us multiply by 100 and compute X = 100 Ball(K) (5.10) . Calculate the fair value of a European call butterfly spread (x100) using the Black-Scholes formula, for the following strikes. K | X= 100 Bcall 50 75 100 125 150 If you have done your work correctly, the answers should all be positive. . If K2 (K1 + Ks)/2, the call values c1, c2 and C3 from the Black-Scholes formula satisfy the inequality . The Black-Scholes formula for a European call is a convex function of the strike price