The client informs you that he wants to buy a stock, which costs $$17$ per share right now. He

would like a portfolio payoff diagram as seen below. You are asked to combine this stock, call

options $($purchase or write$),$ put options $($purchase or write$)$ and create the portfolio payoff

diagram below $($the absolute values of all the slopes are $1$ in the diagram$)$Specifically$,$ you can use

$1.$ The stock $($cost of the stock: $$17)$

$2.$ Call and Put options on the stock with Exercise price: $$20($cost of call: $$15,$ put: $$2)$

$3.$ Call and Put options on the stock with Exercise price: $$30($cost of call: $$10,$ put: $$3)$

$4.$ Call and Put options on the stock with Exercise price: $$40($cost of call: $$5,$ put: $$4)$

$5.$ Call and Put options on the stock with Exercise price: $$60($cost of call: $$4,$ put: $$5)$

$6.$ Call and Put options on the stock with Exercise price: $$70($cost of call: $$3,$ put: $$10)$

$7.$ Call and Put options on the stock with Exercise price: $$80($cost of call: $$2,$ put: $$12)$

$8.$ Call and Put options on the stock with Exercise price: $$100($cost of call: $$4,$ put: $$15)$

Answer the following questions in your report:

$1.$ How do you obtain the payoff diagram above? In other words, what portfolio combination

leads to the payoff diagram below?

$2.$ What is the cost of this portfolio?

$3.$ Using Excel, create the payoff diagram of this option strategy using the stock prices on the x$-$

axis and calculating the total payoff at those stock prices $($Create the graph by using those stock

prices in the first column, and the payoffs in the next column. Use Scatter Plot $>$ Scatter with

Straight lines$).$