Question 2 (total of 15 marks): Your friend entered into some derivative contracts. She: Bought two 1 year CME American put options on gold at a strike price of $1300

perounce for a premium of $160 per ounce, then; Bought one 1 year CME futures contract on gold at a futures price of $1200 per ounce.The spot gold price is $1190 per ounce. Question 2a (11 marks): Draw the strategy on a graph below with profits on the y-axis andthe underlying gold price on the x-axis. Mark every detail possible on the graph, including the strike prices, breakeven points,maximum possible loss and the current level of the index. Question 2b (1 marks): What is or are the break-even (zero profit) point(s)? Question 2c (1 marks): What is the maximum possible loss on this option strategy? Question 2d (1 marks): What is the maximum possible profit on this option strategy? Question 2e (1 marks): Will your friend make a large profit if the underlying asset pricerises, falls, or stays the same?

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