(hint: You know what the total payoff is at 48 and at 52, so you can solve this by making a table like the ones you made to find the payoff of a portfolio of options. Alternatively, you can use the fact that the portfolio given is a butterfly spread.)

1-year European put options on the same stock are priced as followed: i) 38-strike is priced at 4.4 ii) 44-strike is priced at 7.5 iii) 48-strike is priced at 9.4 To seek arbitrage profit, you buy 4 units of the 38-strike put, x units of 44-strike put and y units of 48-strike put so that the payoff is 0 whenever the stock price is not in between 38 and 48 after 1 year. Which of the following pairs of x and y should you choose? (A positive number indicates a long position, and vice versa) Possible Answers x = 6, y = -10 8 x = -6, y = 10 cx = 10, y = -6 D X = -10, y = 6 E There is no arbitrage opportunity