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An investor buys a stock for $36. At the same time a six-month put option to sell the stock for $35 is selling for $2.

An investor buys a stock for $36. At the same time a six-month put option to sell the stock for $35 is selling for $2. a) What is the profit or loss from purchasing the stock if the price of the stock is $30, $35, or $40?

b) If the investor also purchases the put (i.e. constructs a protective put) what is the combined cash outflow?

c) If the investor constructs the protective put, what is the profit or loss if the price of the stock is $30, $35, or $40 at the put

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