Consider European put and call options written on 100 shares of the same stock, with maturity 6 months and stock price of $50 per share. Draw payoff diagrams for each of the following strategies:

(i) Buy 100 shares and a European put with strike price $40, and sell a Euro- pean call with an exercise price $60.

(ii) Consider the strategy as in (i), and borrow $4902 at semi-annual interest rate 2%.

(iii) Buy a European put and call with strike price $50, and sell a European put and call with strike price $40 and $60 respectively. [10 marks]