You engage in a so-called covered call by buying the Magna Corporation stock and at the same time writing a call option on the stock. The current share price of Magna is $50. The call option has a strike price of $50 and expires in one year. The current price of the call option is $10.

1. At what price ranges of the Magna stock is the call option payoff positive at the expiration date (from the perspective of the holder=buyer of the option)? (10 points)
2. Suppose the price of the Magna stock at the expiration date is $55. What is the payoff of your covered call (i.e., the position of the stock and the written call)? What is the return on your covered call (hint: consider that at the time you purchased the stock, you also received the premium from selling the option)? (10 points)