For every question, please write down each main step before you obtain the final answer. Correct final answer with incorrect related work (calculation) or without any work may receive 0 point. On the contrary, incorrect final answer with correct related work (calculation) will receive partial credits.

Question 4 Put Option [6 points]: Suppose you own a put option that gives you the right to sell 200 shares of MMM Construction to another investor for $25 per share anytime during the next six months. MMMs stock currently sells for $26 per share.

Should you exercise the option and sell the stock to the option writer (seller) if the stock price stays at $26 per share?

Should you exercise the option if the stocks price increases to $28? What would be your gain (loss) if you bought the stock at $28 and then exercised the option?

Should you exercise the option if the stocks price decreases to $23? What would be your gain (loss) if you bought the stock at $23 and then exercised the option?