Example 1 Consider the following portfolio of options on a stock does not pay dividends: 1. A long position in a call option with an exercise price of 50; and 2. A long position in a put option with an exercise price of 50. The options are European and expire one year from now. As usually assumed in this type of question, each option gives the right to buy (sell) 1 share. The current prices of the call and put options are $4 and 5. respectively. a) Constrict a table with the navoffs/mrofits of the portfolio of options (one year from now). b) Carefully draw the pavoffiorofit diagram for the portfolio of options. Pa c) What are the stock prices at which the portfolio breaks even (i.e., has zero profits)? d) What is the motivation for this strategy