You purchased a put option on M common stock. The option has an exercise price of $49 and M's stock currently trades at $51. The option premium is $0.40per 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 $46 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 Net profit per share per share
You purchased a put option on M common stock. The option has an exercise price of $49 and M's stock currently trades at $51. The option premium is $0.40per 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 $46 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 Net profit per share per share
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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
Transcribed Image Text:You purchased a put option on M common stock. The option has an exercise price of $49 and M's stock currently trades at $51. The
option premium is $0.40per 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 $46 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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