1. Suppose you have the following 4 option contracts that expire in exactly 1 year from today.

	Premium	Strike Price
Call 1	$9.89	$75
Call 2	$4.98	$85
Put 1	$3.41	$75
Put 2	$8.30	$85

You establish an option position combining the purchase of Call 1 and Put 2 and the simultaneous sale of Call 2 and Put 1.

1. What is the cost of establishing this position?

2. Complete the following table, calculating the payoffs of the 4 options, the net cost of the position, and the profit of the overall combination.

Stock Price	$65	$70	$75	$80	$85	$90	$95
Payoff Long Call 1
Payoff Short Call 2
Payoff Long Put 2
Payoff Short Put 1
Terminal Value
Net Premium Paid
Profit

3. What must be the risk-free rate of return given what you found in part (b)?