Question 2 (20 marks)

b) If a superannuation fund is invested in the shares of Bank A whose shares trade at USD 16.75 a share, and the fund has purchased put options on these shares at a premium of USD 0.80 with an exercise price of USD 15 per share, when will the fund exercise its put options? (5 marks)

c) Illustrate the profit/loss profile of the writer and buyer of the put option along with the breakeven price on a chart (10 marks)