Question 38 Consider the following data for Stock ABC and then choose the correct answer to the question below: Price of Stock ABC $75

Finance Dec 25, 2020

Question 38 Consider the following data for Stock ABC and then choose the correct answer to the question below: Price of Stock ABC $75.00 Exercise Price of 3-month Put $80.00 $4.00 Market Price of Put What is the maximum profit the buyer of the put could earn? $80.00 ?? $4.00 $71.00 O $76.00 $75.00
Question 39 Which of the following statements is Correct? An easy monetary policy increases the cost of credit. All else equal, if the country's exports increase, GDP declines. An increase in stock prices is a lagging indicator of economic activity. All else equal, an easy monetary policy should generate a lower required return for common stock.

Expert Solution

The maximum profit is computed as shown below:

= Exercise price - Price of Stock - Market price of put

Since the price of stock can go to zero, hence the maximum profit will be as follows:

= $ 80 - $ 0 - $ 4

= $ 76.00

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