The Wall Street Journal reported the following prices for 3Com options for trading on Friday, February 7, 1997. The stock itself closed at $50.75.

a. Construct a payoff diagram for buying a $50 April call option on 3Com. Construct the diagrams for net payoffs, i. e. after deducting the option premium.

b. Construct a payoff diagram for writing a $50 April call option on 3Com and for writing a $50 April put option (combined). Construct the diagrams for net payoffs, i. e. after adding the option premium.

c. If the risk-free rate of interest (continuously compounded) is 5%, then does put-call parity hold for the April options with X=$50 and X=$65 (calculations based on 71 days to maturity, 365-day year)?

Calls (Prices in $) Strike February March April July 45 6.625 7.5 8 10.5 50 2.8125 4.75 5.875 55 1.0625 2.625 3.75 6 60 0.4375 1.3125 | 1.875 4.25 65 0.1875 0.625 1.25 70 0.0625 Puts (Prices in $) Strike February March April July 45 1 1.8125 2.625 4.25 50 2.375 4 5 55 5.375 7.625 8.125 8.75 60 9.75 10.875 12.5 65 15.5 16.5 16.75 70 20.75