Question: (c) A put option with a 420 exercise price on the FTSE 100 Index is currently at 11.75. The FTSE 100 Index is at 411.79.

(c) A put option with a 420 exercise price on the FTSE 100 Index is currently at 11.75. The FTSE 100 Index is at 411.79. Find the intrinsic value and the time value of this option. [5 marks] (d) The upper and lower bounds on option prices must be satisfied irrespective of the underlying price of the option. Therefore, explain the upper and lower bounds that must be satisfied by options prices and carefully outline how an investor or trader could profit in this context. [25 marks] (c) A put option with a 420 exercise price on the FTSE 100 Index is currently at 11.75. The FTSE 100 Index is at 411.79. Find the intrinsic value and the time value of this option. [5 marks] (d) The upper and lower bounds on option prices must be satisfied irrespective of the underlying price of the option. Therefore, explain the upper and lower bounds that must be satisfied by options prices and carefully outline how an investor or trader could profit in this context. [25 marks]

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