Question: 1a. A put option on Macrohard stock with a strike price of $36 has a time value of $1.50, and a premium of $4.00. What

1a.A put option on Macrohard stock with a strike price of $36 has a time value of $1.50, and a premium of $4.00. What must be the price of the stock? Please show work, formula and your calculations.

1b.Is this put option in or out of the money? Explain.

1c.Explain thoroughly why increased volatility in the underlying stock price increases the premium of an option.

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