Exercise 1 You are given the following information on 6-month European calls and puts on a non-dividend paying stock: Strike 58 62 Call Premium 4.052 2.524 Put Premium 3.675 5.913 You enter long positions on two 58-strike put options and one 62-strike call. a) Draw the payoff and the profit diagram of your combined position. b) Calculate the maximum and minimum payoff. c) Calculate the profit if the stock price at expiration is 60. Exercise 2 a) You short an index at S, and write a put on this index. Give the name of your combined position, the reason to write a put with index and an equivalent strategy profit (with the proof). b) You short an index and you write a 6-months 100-strike put on this index. Suppose that 100-strike call on this index costs 4 and the risk-free effective interest rate is 2%. What is the profit of your combined position if the index price at expiration is 120