Suppose XYZ stock has a price of $50 and pays no dividends. The effective annual interest rate is 10%. Draw payoff and profit diagrams for a long position in the stock. Verify that profit is 0 at a...

Suppose XYZ stock has a price of $50 and pays no dividends. The effective annual interest rate is 10%. Draw payoff and profit diagrams for a long position in the stock. Verify that profit is 0 at a price in 1 year of $55.

Using the same information as the previous question, draw payoff and profit diagrams for a short position in the stock. Verify that profit is 0 at a price in 1 year of $55.