Question 4 (15 marks) a) The shares of From Russia With Love Co. (FRWL) currently trade at $50, and you believe that its stock price will go up soon. You have $50 in cash and you can borrow an additional $50 from a bank at an annual rate of 5%. Suppose that in one year you sell your shares at $60 each. How did your decision to take or not to take the loan affect the 1-year return on your portfolio? (5 marks) b) You just purchased Stock A in the spot market at $38 and a put option at $1. The strike price of the put option is $35. i) What is the maximum profit of your position? (3 marks) ii) What is the maximum loss of your position? (3 marks) iii) What is the breakeven price of your position? (4 marks) [Note: Full mark would only be given if supporting calculation or explanations are provided.)