Problema particular put is the option to sell stock at 40, Ask an Expert

Accounting

Problem:

A particular put is the option to sell stock at $40. It expires after three months and currently sells for $2 when the price of the stock is $42.

Required:

Question 1: If an investor buys the put, what will the profit be after three months if the price of the stock is $45? $40? $35?

Question 2: What will the profit from selling this put be after three months if the price of the stock is $45? $40? $35?

Question 3: Compare the answers to a) and b). What is the implication of the comparison?

Note: Please explain comprehensively and give step by step solution.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91171792

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