a.    : Betty and Bob assume that the future (expiration) price random variable for    MCD as pertable

 X

40

45

50

55

60

P(X=)

.10

.20

.30

.20

.20

Betty is long 100 shares of MCD @$48 and long 1 October 45 Put @$5 

and short 1 October 55 [email protected]$3. This is the “Collar” strategy or “Hedge Wrap”. Find the expected value of the algebraic value of the position at expiration, E(W), and the expected value of the position P&L, E(Y), at expiration. Find the standard deviation of the algebraic value of the position at expiration, , and the standard deviation of the position P&L, , at expiration. (For extra credit neatly draw the graph of Y versus X and algebraically determine the break-even points.) how to calculate standard deviation of y.