Consider a firm which current stock price has experienced a sharp decline from above $40 to $20 now (at t=0). Suppose an investor believes that the stock price will rebound to $30 at t=1 An investment advisor suggests the investor to buy the following portfolio of options. Sell 1 call option with exercise price E-$20 Buy 2 call options with exercise price E S30 Sell 1 call option with exercise price E-$36 (a)Draw the payoff of this strategy at t-1. [6p] (b)Should the investor follow the recommendation? Please explain. [2p] Suppose at t-0 the price (premium) of the call with E-$30 is $2.40 and the price of the call with E-$36 is $1.30. Suppose there is no arbitrage. Can you determine the minimum price of the call with E-$20? If so, what is it? If not, what additional information do you need? [4p] (c) Consider a firm which current stock price has experienced a sharp decline from above $40 to $20 now (at t=0). Suppose an investor believes that the stock price will rebound to $30 at t=1 An investment advisor suggests the investor to buy the following portfolio of options. Sell 1 call option with exercise price E-$20 Buy 2 call options with exercise price E S30 Sell 1 call option with exercise price E-$36 (a)Draw the payoff of this strategy at t-1. [6p] (b)Should the investor follow the recommendation? Please explain. [2p] Suppose at t-0 the price (premium) of the call with E-$30 is $2.40 and the price of the call with E-$36 is $1.30. Suppose there is no arbitrage. Can you determine the minimum price of the call with E-$20? If so, what is it? If not, what additional information do you need? [4p] (c)