Note: You can submit handwritten solutions or a write up in word or another text editor. ${?}^1$

Writing by hand will make the solution process closer to what you will face later on the exam,

but your handwriting should be easily readable. You need to show your answers together

with your solutions, you will be graded based on both.

Note # $2$: Assume that all options are European unless otherwise said.

Problem $1$ Suggest two different portfolios that produce the payoff diagram as in the

graph below. Both portfolios may contain options, any amount of risk$-$free borrowing or

lending, and the underlying stock. Portfolio $1$ may contain call options but no put options.

Portfolio $2$ may contain put options but no call options.