Question 2 [10 points] An investment company offers put options on a stock with exercise date t=1. (a) Draw the payoff (at t=1) of a portfolio that consists of the following two put options: Buy a put with exercise price E=$ 14 Sell a put with exercise price E=$23 as a mction of the underlying stock price at t=1. [3p] Suppose the (t=0) prices of these puts are as follows: Price E=$14 $3.00 E=$23 $2.00 (b) Is there an arbitrage? If so, nd a protable trading strategy. [4p] The investment company adds one more option to the above portfolio. (0) Draw the payoff (at t=1) of a portfolio that consists of the following three put options: Buy a put with exercise price E=$8 Buy a put with exercise price E=$ 14 Sell a put with exercise price E=$23 as a function of the underlying stock price at t=1. [3p]