Profit diagram for the straddle mentioned

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Reference no: EM131015967

An investor purchases a call on a stock, with an exercise price of $45 and premium of $3, and a put option with the same maturity that has an exercise price of $45 and premium of $2.

a. Please draw a payoff diagram and a profit diagram for the ‘straddle’ mentioned in the question.

b. Compute the profits when the price is $0, $30, $45 and $70.

Reference no: EM131015967

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