Suppose the effective annual interest rate is 6% and Wagner Companys stock currently trades for $88 per share. Suppose the premium for a 1-year $85-strike call option on the stock is $19.87, and the premium for a $85-strike put is $12.06. What is the profit earned on a long $85-strike straddle if Wagners stock is worth $84.15 when the options expire? (You may assume the stock pays no dividends over the next year.)

Selected Answer:	c. $7.43
Answers:	a. $39.10
	b. $0.85
	c. $7.43
	d. $32.15
	e. $33.00