Question: 1. Consider a protective put option strategy on Intel stock. The current price of Intel stock is S0 = $110 and the strike price of

1. Consider a protective put option strategy on Intel stock. The current price of Intel stock is S0 = $110 and the strike price of a put option on Intel stock is K = 110. The 1-year risk-free rate is 12.5% on an annual basis, or 11.778% on a continuously compounding basis.

Continue to assume that Intel stock is trading at $110 today. You know it will either be worth $140 or $80 next year.

Continue to assume what you were assuming in the previous parts of this question. Using this compare the profits that you would make at the end of year one with a protective put strategy to what you would make by just purchasing the underlying stock.

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