Problem $3$

Suppose the stock of Cameco Corp. currently trades at $$26$ per share. The following options on the stock are available:

$\backslash$table$[[$Options$,$Strike Price,Premium,Maturity$],[$Call$,$$$27,$$$2\mathrm{.}6,1$ month$],[$Put$,$$$28,$$$1\mathrm{.}5,1$ month$]]$

A$.$ Given today's stock price, determine the intrinsic value of the call and put.

B$.$ An investor purchased one contract of the $27$ call and sold two contracts of the $28$ put. Suppose in one month, the stock price turns out to be $$27\mathrm{.}50$ per share. How much is the total gain or loss for this investor?

C$.$ Draw a profit diagram for a short position in the put. Label the diagram well. For example, indicate the intersection with the horizontal and vertical axes, show the maximum profit and loss if available.

D$.$ Put options can be awarded to executives as incentive compensation. True or false? Briefly explain.