Q2. On September 25, 2009 McDonald's (MCD) stock is trading at $57 per share. The price of a put option on MCD expiring in 3 months is $0.3 with exercise price X = $55 and $1.10 with X =$57.5 You think that shares of MCD will fall in price in the immediate future, and you want to speculate on the stock. Given the range of possible stock price of MCD in 3 month, calculate the dollar profits and percentage returns (which equals to dollar profits / cost of the option) of the following two investments separately:

(1). Purchasing 1,000 put options on MCD with an exercise price of $55 (2 points)

(2). Purchasing 1,000 put options on MCD with an exercise price of $57.5 (2 points)

Exercise price Put price 0.3 57.5 Investment total costs A: 1000 options, X-55 B: 1000 options, X-57.50 Stock price in 3 months, ST Dollar Profit on Return (%) on strategy 1 Dollar Profit on Startegy 2 Return (%) on strategy 2 Startegy 1 get formula get formula get formula get formula 20.0 40.0 45.0 50.0 55.0 56.0 56.5 57.0 57.5 58.0 59.0 60.0 65.0 70.0