Mr. Chang bought two Xerox European call contracts and one Xer

ox European put contract, both of

which expire in three months. Each contract is for 100 options. The exercise price of each call is $70,

and the exercise price of each put is $75.

a.

What is the payoff of Mr. Changs position at expiration if the market pr

ice of Xerox stock

on the expiration date is $65? What if the market price is $72? What if the market price is

$80?

b.

Draw Mr. Changs payoff diagram with respect to the stock price at expiration.