Given the following information,
Price of a stock $39
Strike price of a six-month call $35
Market price of the call $8
Strike price of a six-month put $40
Market price of the put $3
Finish the following sentences:
a. The intrinsic value of the call is _________.
b. The intrinsic value of the put is _________.
c. The time premium paid for the call is _________.
d. The time premium paid for the put is _________.
At the expiration of the options (i.e., after six months have lapsed), the price of the stock is $45.
e. The profit (loss)from buying the call is _______.
f. The profit (loss)from writing the call covered (i.e., buying the stock and selling the call)is ________.
g. The profit (loss)from buying the put is _______.
h. The profit (loss)from selling the stock short is ______.
i. The maximum possible loss from buying the put is ______.
j. At expiration, the maximum price commanded by a put or a call is _______.
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