The following investors have each taken a different option strategy to be held over a 1-year period:

Steven - Long Straddle (using 30 strike)

Carol - Ratio Call Backspread

Gus - Long Strangle (using 25 and 35 strikes)

Paul - Ratio Put Backspread (using 30 and 35 strike)

Wendy - Written Butterfly Spread

The continuously compounded risk-free interest rate is 5% and the only options they were able to use

were these 1-year options on a single stock:

Strike 25 Strike 30 Strike 35

Call 6.20 4.17

Put 2.55 3.05 4.32

(a) Describe how each investor would have constructed his/her option strategy.

(b) On a SINGLE pair of axes (Profit vs ST), include the profit diagrams for ALL five investors.

(c) Discuss the investment outlook of the five investors, comparing each one with the others.

(d) What is the profit to each investor if the stock price after one year turns out to be: