Assume that the initial index value is S0 = $100, the strike price in the put option is K1 = $90, and the strike price in the call option is K2 = $110. The split-strike conversion strategy consists of buying one share of the index, buying a put option on the index, and selling a call option on the index. Consider two alternative strategies: (1) buy and hold the S&P 500 index and (2) the split-strike conversion strategy. Assume that the investment horizon is T = 1 year.

a) Write down the formulas that show how the profit to each strategy is computed.