QUESTION 5 [1+2+1=4 MARKS] An investor believes that there will be a small change in a stock price but she is unsure of whether it will be a small drop or a small increase. A call with a strike price of $50 costs $6. A put with the same strike price and expiration date costs $4. a) Given his beliefs, which one of the following strategies makes sense for the investor? Choose one and explain your choice 1. A Short (or, reverse) Calendar spread 2. A Box spread 3. A Short straddle 4. A Bear spread using Calls b) Construct a table that shows the profit from the strategy you chose in a) above. c) For what range of stock prices would the strategy you chose in a) lead to a loss