Please answer the following questions:

A. Assume that the strike price is $50. Draw payoff diagrams of the following positions.

1. Call buyer
2. Call seller
3. Put buyer
4. Put Seller

B. Suppose that you hold a share of stock and a PUT option on that share with a strike price of $100. Draw the payoff diagram when the option expires.

C. If you cant sell a share short, you can achieve exactly the same final payoff by a combination of options and borrowing or lending. What is this combination?

D. How does the price of a put option respond to the following changes, other things equal? Explain.

(a) Stock price increases.

(b) Exercise price is increased.

(c) Risk-free rate increases.

(d) Expiration date of the option is extended.

(e) Volatility of the stock price falls.

(f) Time passes.

E. Which one of the following is true?

(a) Call premium is increasing in the expected return on the underlying asset.

(b) Call premium is decreasing in the expected return on the underlying asset.

(c) The expected return on the underlying asset is irrelevant.

(d) Options (a), (b), and (c) are all incorrect.

PLEASE SHOW SOLUTION AND EXPLANATION. THANK YOU.