Draw a diagram showing the payoffs when the options expire, Accounting Basics

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Draw a diagram showing the payoffs when the options expire

Problem

Suppose that Miss Bella borrows the present value of $100 today, buys a six month Put option on stock Y with an exercise price of $150 and sells a six month Put option on stock Y with an exercise price of $50.

a) Draw a diagram showing the payoffs when the options expire.
b) Suggest two other combinations of loans, options, and the underlying stock that would give Miss Bella the same pay-off.

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Accounting Basics: Draw a diagram showing the payoffs when the options expire

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