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Suppose the stock has a price of $55 and a volatility of 30%. No dividends are expected and the risk-free rate is 0% for the

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Suppose the stock has a price of $55 and a volatility of 30%. No dividends are expected and the risk-free rate is 0% for the next quarter. The table below gives details for options on the stock with maturity of 3 months. You believe the stock price will be stable around $55 with little volatility. You plan to take advantage of this by buying a butterfly spread - Long on the calls at K = 50 and 60 and Short on the call at K = 55. Option Call Call Call Strike Price 60 55 50 Option Price 0.25 0.80 1.4 a. Develop the Profit Table at maturity for this position. b. Find the break-even point(s). c. Compute the trading range at maturity where the net payoff is positive. d. What is the opinion of the trader who sold you this spread

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