You have a stock priced at $40 (which you already own). The three-month call with a strike of $45 is $2.25. The three-month put with a strike of $35.00 is $3.00.

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?