Three call options on a stock currently selling for $40 have the same expiration date and strike prices of $35, $40, and $45. The market prices are $12, $7, and $5 respectively.

Explain how a butterfly spread can be created from these three options.

Construct a table showing the payoff and profit from this strategy for different values of ST.

Sketch the profit as a function of ST.

For what values of ST does the butterfly spread result in a loss?