John, the CEO of Unique Corp Ltd, is now preparing for acquiring the target firm. Currently, the Unique Corp has already purchased 10 million shares of the target firm which currently valued at $48. The potential acquisition is hostile therefore John worries that the acquisition may fail eventually. If the acquisition fails, Unique Corp has to sell the target firm shares it holds in the market and may suffer from a loss. John suggests that the company should take a long position in put option of target firms shares in order to protect the potential loss in selling the shares in the market when the acquisition is failed. If the option price of a put of the target firms share with exercise price of $45 is $2 per share. a. Complete the following table for each of the following positions. In calculating combined terminal position value, ignore the time differential between the initial option expense or receipt and the terminal payoff. (7 marks) Expiration date target firm stock price Expiration date option payoff Initial option premium Combined terminal position value

Expiration date target firm stock price	Expiration date option payoff	Initial option premium	Combined terminal position value
25
30
35
40
45
50
55
60
65
70
75

b. Graph the combined terminal position value for the above hedged position, using combined terminal position value on the vertical axis (Y) and target firms expiration date stock price on the horizontal axis (X). c. Explain why the hedging strategy mentioned above is appropriate if Jamess objective is also to enjoy the upside gain of the stock. d. Other than the above-mentioned hedging strategy, suggest another hedging strategy and discuss the advantage(s) and disadvantages(s) of your suggestion in detail