For the following problem assume the effective annual interest rate is 8%, the current index price is $100, and the premiums for options with one year to expiration are:

Strike Call Put

95 14.99 2.95

100 11.93 4.53

105 9.32 6.54

110 7.15 8.99

An option is developed which is: Long Put (Strike = 95) + Long Call (Strike = 100) + 2 Short Calls (Strike = 105) + Long Index Develop a profit function as a function of the stock price in one year. The function should show profit for different ranges of stock prices and the final answer should not include the max( , ) function.

Sketch the profit function for this option