XYZ stock is currently trading at $100. The one-year effective interest rate is 5% ($1 lent today yields $05 one year from now). A one year call with strike price $105 is priced at $5. Suppose you buy one call for $5, short one share for $100, and lend $100.

A)Graph the PROFIT function for this position. (Y axis is profit, x axis is share price) Be sure to label the points, if any, where the graph intercepts the x-axis or y-axis.

B)What common derivative is the combination of investments (call share + loan) equivalent to?

C) In the absence of arbitrage, what should be the price of this derivative if it were available?