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You purchased a put option on M common stock. The option has an exercise price of $39 and M's stock currently trades at $41. The option premium is $0.60per share. a. What is your net profit on the option if M's stock price does not change over the life of the option? b. What is your net profit on the option if M's stock price falls to $35 and you exercise the option? (For all requirements, negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g.. 32.16)) a. Net profit b. Net profit per share per share

You purchased a put option on M common stock. The option has an exercise price of $39 and M's stock currently trades at $41. The option premium is $0.60per share. a. What is your net profit on the option if M's stock price does not change over the life of the option? b. What is your net profit on the option if M's stock price falls to $35 and you exercise the option? (For all requirements, negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g.. 32.16)) a. Net profit b. Net profit per share per share

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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You purchased a put option on M common stock. The option has an exercise price of $39 and M's stock currently trades at $41. The option premium is $0.60per share. a. What is your net profit on the option if M's stock price does not change over the life of the option? b. What is your net profit on the option if M's stock price falls to $35 and you exercise the option? (For all requirements, negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g.. 32.16)) a. Net profit b. Net profit per share per share
Transcribed Image Text:You purchased a put option on M common stock. The option has an exercise price of $39 and M's stock currently trades at $41. The option premium is $0.60per share. a. What is your net profit on the option if M's stock price does not change over the life of the option? b. What is your net profit on the option if M's stock price falls to $35 and you exercise the option? (For all requirements, negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g.. 32.16)) a. Net profit b. Net profit per share per share
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