$27; $27 Save Question 14 (4 points) Suppose you believe that Du Pont\'s stock p

Question

$27; $27 Save Question 14 (4 points) Suppose you believe that Du Pont's stock price is going to decline from its current level of $ 84.65 sometime during the next 5 months. For $ 1,202.38 you could buy a 5-month put option giving you the right to sell 100 shares at a price of $80 per share. If you bought a 100-share contract for S 1,202.38 and Du Pont's stock price actually changed to $ 59.88 at the end of five months, your net profit (or loss) after behaving rationally on the decision to exercise the option would be Use a - sign if you lose money on the contract Show your answer to the nearest .01 . Do not use $ or , signs in your answer.

Explanation / Answer

You would make $80 - $59.88 = $20.12 per share, for a total gross profit of 100($20.12) = $2,012.

Net profit would be reduced by costs, $2,012 - $1202.38 = $809.62 Answer

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