Case $3$ Instruction

A put option in finance allows you to sell a share of stock at a given price in the future. There are different types of put options. A European put option allows you to sell a share of stock at a given price, called the exercise price, at a particular point in time after the purchase of the option. For example, suppose you purchase a six$-$month European put option for a share of stock with an exercise price of $$26.$ If six months later, the stock price per share is $$26$ or more, the option has no value. If in six months the stock price is lower than $$26$ per share, then you can purchase the stock and immediately sell it at the higher exercise price of $$26.$ If the price per share in six months is $$22\mathrm{.}50,$ you can purchase a share of the stock for $$22\mathrm{.}50$ and then use the put option to immediately sell the share for $$26.$ Your profit would be the difference, $$26-$$$22\mathrm{.}50=$$$3\mathrm{.}50$ per share, less the cost of the option. If you paid $$1\mathrm{.}00$ per put option, then your profit would be $$3\mathrm{.}50-$ $$1\mathrm{.}00=$$$2\mathrm{.}50$ per share.

Managerial Report

Build a $($spreadsheet$)$ model to calculate the profit of this European put option. $(20\%)($Hint: Follow the above to create the parameters and the formulas for Model$)$

Construct a data table that shows the profit per share for a share price in six months between $$10$ and $$30$ per share in increments of $$1\mathrm{.}00.$

Please answer wuestion $1$ and explain