The options for Microsoft (stock price $25.84) are trading at the following prices:

Strike	Calls	Puts
22.50	3.40	0.10
25.00	1.25	0.30
27.50	0.15	1.80

a. Create a bull call spread based on an outlook that Microsoft will be over 27.50 at expiration. Include the cost of the trade and maximum profit or loss at expiration

b. Create a bear put spread based on an outlook that Microsoft with be under 25.00 at expiration.

Note: Could you please explain the process/formulas that go behind creating a bull and bear spread please?