Stock xyz is trading today at 50 and pays no dividends the


Stock XYZ is trading today at $50, and pays no dividends. The effective 3 month interest rate is 0.25%. All options are European style and expire in 3 months.

Option type Strike Bid Ask

Call 45 6.75 7.00

Put 45 1.70 1.80

Call 55 2.15 2.25

Put 55 6.90 7.15

Construct a bull spread using just the call options and draw its profit diagram at option expiry.

Construct the same bull spread using just put options and draw its profit diagram at option expiry.

Don't forget to take interest rates and bid/ask prices in to account.

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Mathematics: Stock xyz is trading today at 50 and pays no dividends the
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