Chapter 21, Problem 4P

Summary Introduction

Put option:

A put option can be defined as an option contract that gives the right to an owner to sell a definite amount of an underlying security at a definite price within a particular time. However, the right is not an obligation.

Strike price:

Strike price can be defined as the price at which a derivative may be exercised.

(a)

To determine: The payoff of the put.

(b)

Summary Introduction

To determine: The payoff of the put.

(c)

Summary Introduction

To show: A payoff diagram representing the value of the put at expiration as a function of the stock price at expiration.