1. Calculate the price of a call and a put option with exercise price $10 and 26 weeks to maturity by using Black Scholes. The initial price of the stock is $13. The risk-free rate is 2.43% per year and the standard deviation of stock returns is 12% per year.
2. The stock of question 1 has a price of $13, which can later be $15 or $11 with different probabilities. The options (calls and puts), with an exercise price $10, are the ones you valued in question 1. For all range of probabilities:

1. Calculate the expected returns and standard deviation for a covered call and protective put portfolio.
2. How does the standard deviation of these three alternatives compare?
3. For which combination of probabilities each alternative have a positive return?