Consider the example of Auric. a. Suppose that Auric insures against a price increase by purchasing a 440-strike call. Verify by drawing a profit diagram that simultaneously selling a 400- strike put...

Consider the example of Auric.

a. Suppose that Auric insures against a price increase by purchasing a 440-strike call. Verify by drawing a profit diagram that simultaneously selling a 400- strike put will generate a collar. What is the cost of this collar to Auric?

b. Find the strike prices for a zero-cost collar (buy high-strike call, sell low-strike put) for which the strikes differ by $30.