1. Jill bought 500 shares of MM stock 6 months ago when they were priced at $80 per share. She spent $40,000 6 months ago. The stock is trading at $97 today. There is a 6 month put option on MM (strike price of 95) that is trading at $2.80. Jill would like to eventually sell her shares of MM in 6 months, but she would like to protect some of her profits over the next 6 months.

1. IF she set up a protective put (bought 5 put contracts) today, what would her total profit over the 1 year period be from these transactions if in 6 months MM is trading at $70 and she sells all 500 shares (there is one year between the time she bought the shares and sold the shares)?

Profit = $_______________

2. IF she set up a protective put (bought 5 put contracts) today, what would her total profit over the 1 year time period be from these transactions if in 6 months MM is trading at $110 and she sells all 500 shares (there is one year between the time she bought the shares and sold the shares)?

Profit = $_________________

3. Briefly describe the advantage of setting up a protective put?