You have a stock priced at $20 (which you already own). The three-month call with a strike of $22.50 is $0.40. The three-month put with a strike of $17.50 is $0.50.

a. (3 points) How would you create a covered call and what would it cost? Why would you do this?

b. (3 points) How would you create a protective put and what would it cost? Why would you do this?

c. (4 points) How would you create a collar and what would it cost? Why would you do this?