An investor buys a stock for $36. At the same time a six-month put option to sell the stock for $35

QUESTION

An investor buys a stock for $36. At the same time a six-month
put option to sell the stock for $35 is selling for $2.

a) What is the profit or loss from purchasing the stock if the
price of the stock is $30, $35, or $40?

b) If the investor also purchases the put (i.e. constructs a
protective put) what is the combined cash
outflow?

c) If the investor constructs the protective put, what is the
profit or loss if the price of the stock is $30, $35, or $40 at the
putAc?cs expiration? At what price of the stock does the investor
break even?
d) What is the maximum potential loss and maximum potential
profit from this protective put?

e) If, after six months, the price of the stock is $37, what is the
investorAc?cs maximum possible loss?
Please show ALL work.
Please find the

ANSWER:

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