Question 11 1 pts Consider the following data for Stock GGG and then choose the correct answer to the question below: Price of Stock GGG $40

Finance Nov 27, 2020

Question 11 1 pts Consider the following data for Stock GGG and then choose the correct answer to the question below: Price of Stock GGG $40.00 Exercise Price of 3-month Put $40.00 Market Price of Put $4.00 If at expiration of the put option the price of the stock is at $43.00, what would be the % return earned or lost by a buyer of the put option? Enter your answer below as a positive or negative whole number without any % signs. For example, if your answer is -50%, enter it as -50. If its 35%, enter it as 35.

Expert Solution

value of put option at expiry = max of (0, strike price - expiry price )

=max of( 0, 40 -43)

=max of( 0, -3)

= $0

Loss on put = value of put on expiry - purchase price

= 0 -4

= -4

Return % = Loss / Purchase price *100

= -4 /4 *100

= - 100 %

= -100 ( without percentage sign)

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