1. EXPLAIN THE PRODUCTIVE PUT OPTION STRATERGY IS. AND THE PURPOSE OF ENTERING INTO SUCH A STRATERGY.

NIMAL BUYS 100 SHARES OF JW STOCKS FOR RS.87 PER SHARE AND THREE MONTHS EXPIRATION JW PUT OPTIONS WITH AN EXERCISE PRICE OF RS.105 FOR RS.20 EACH. WHAT IS THE RUPEE GAIN /LOSS IF AT OPTION EXIRATION THE STOCK IS SELLING FOR RS.80 PER SHARE? SHOW YOUR CALCULATIONS.

2.

The annualised monthly excess returns of the ASPI market index returns (r_m-r_f), were regressed against the corresponding excess returns of the two stocks, Black and White (r_i-r_f) over a five year period in two Market model regression models, using Ordinary Least Squares (OLS). The following results were obtained:

Black White

Intercept on y- axis -3.68% 13.96%

Slope coefficient 0.69 0.97

Regression R-square 0.35 0.22

Std. deviation of regression residuals 13.02% 21.45%

Carefully interpret and explain what each of the regression results mean