Problem:

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.

Required:

Question 1: What is the profit or loss from purchasing the stock if the price of the stock is $30, $35, or $40?

Question 2: If the investor also purchases the put (i.e. constructs a protective put) what is the combined cash outflow?

Question 3: 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 put's expiration? At what price of the stock does the investor break even?

Question 4: What is the maximum potential loss and maximum potential profit from this protective put?

Question 5: If, after six months, the price of the stock is $37, what is the investor's maximum possible loss?

Please explain in detail and also provide step by step solution of each question.