You are faced with the probability distribution of the HPR on the stock market index fund given

Question:

You are faced with the probability of the HPR on the stock market index fund given in Spreadsheet 5.1 of the text. Suppose the price of a put option on a share of the index fund with exercise price of $110 and time to expiration of 1 year is $12.
a. What is the probability of the HPR on the put option?
b. What is the probability of the HPR on a consisting of one share of the index fund and a put option?
c. In what sense does buying the put option constitute a purchase of insurance in this case?

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