Suppose, an investor purchases a stock for $65 and purchases a put option on the same stock with an exercise price of $50 for a premium of $5 per share. The put option expires in one year. Assume that the stock pays no dividends, there are no transactions costs or taxes, and the investor will sell the stock in one year, exactly when the option expires.

a) What is the maximum profit the investor can earn on the combined protective put position?

Select one:

$65.00

-$15.00

$5.00

$70.00

$55.00

$20.00

Negative infinity

Positive infinity

b) What is the lowest possible profit from the combined investment?

Select one:

$0.00

-$5.00

-$65.00

-$50.00

-$15.00

-$70.00

-$20.00

Negative infinity

c) It is now exactly one year later and the investor tells you that the profit on the combined protective put position is $5. What is the stock price based on that information?

Select one:

$0

$65

$50

$55

$70

$75

$60

Unable to answer; one needs to know also whether the investor exercised the put option.