Draw the payoff diagram for the following questions (Put-Call parity) + = + 0

a. Suppose you short the Nokia stock for $100 and buy a 105-strike call. Construct payoff and profit diagrams for this position.

Verify that you obtain the same payoff and profit diagram by present value of borrowing $105 and buying a 105-strike put.

b. Verify that you earn the same profit and payoff by

(a) buying the Nokia stock for $100 and

(b) buying a 95-strike Nokia call, selling a 95-strike Nokia put, and lending $ present value of $95.

Prepare an algebraic table showing the payoff of this position at expiration under different scenarios.