Question 4 ( 25 marks) Consider a put option selling for $4 in which the exercise price is $60 and the price of the underlying is $62. (a) Determine the value at expiration and the profit for the buyer under the following outcomes : i. The price of the underlying at expiration is $64 (2 marks) ii. The price of the underlying at expiration is $50 (2 marks) (b) Determine the value at expiration and the profit for the seller under the following outcomes. i. The price of the underlying at expiration is $51 (2 marks) ii. The price of the underlying at expiration is $68 (2 marks) Robert owns 100 shares of ABC stock with a cost basis of $30 a share. The stock is currently trading at $50 a share. Robert believes the price of ABC stock will fall to $45 a share in the near future but over the longer term of 3 to 5 years, increase in value to $75 a share. Robert would like to benefit from the expected near-term decline if it occurs. Therefore, Robert writes a covered call at a strike price of $55 and a premium of $3. (c) If the price moved from $50 to $45, what would be Robert's profit/loss if covered? (5 marks) (d) What is the maximum profit and loss Robert can incur from the call if exercised? (5 marks) (e) What is the maximum profit Robert can incur from the call if not covered? (4 marks)