shares of Anheuser Busch InBev (BUD) are trading at $101.95, the following Calls and Puts when you take the exam will have four months left till expiration. BUD trades on the Mar, June, Sep, Dec cycle expiration months. The four-month LIBOR is 0.32%.

Strike Price Call Prices Put prices

100 7.10 4.95

105 4.55 7.50

110 2.75 10.80

Draw the profit diagram for a butterfly spread using Call Options (Long the calls with extreme strike prices i.e. $100 and $110)

Price Expectation ___________________________

Volatility Expectation ___________________________

Risk Posture ___________________________

Stock Price

Cash Inflow

Cash Outflow

Profit

0

95

100

105

110

120