You buy the stock at a price of $53 and at the same time you buy...

 

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You buy the stock at a price of $53 and at the same time you buy a put option with an exercise price of $50, paying a premium of $ 2. a. What is your total cost at the beginning? b. If the stock price falls to $40 and you exercise the put, what would be your final wealth in this example? And how much do you gain or lose? c. What is your maximum loss in dollars if the stock price falls to $30 in the market? d. What would final wealth be if the company goes bankrupt and thus you'd see the price of the stock being equal to zero in the stock market? You buy the stock at a price of $53 and at the same time you buy a put option with an exercise price of $50, paying a premium of $ 2. a. What is your total cost at the beginning? b. If the stock price falls to $40 and you exercise the put, what would be your final wealth in this example? And how much do you gain or lose? c. What is your maximum loss in dollars if the stock price falls to $30 in the market? d. What would final wealth be if the company goes bankrupt and thus you'd see the price of the stock being equal to zero in the stock market?

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Heres the breakdown of your questions a Total cost at the beginning Stock price Put option premium 5... View the full answer