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Put option Personal Finance Problem Ed Martin, the pension fund manager for Stark Corporation, is considering purchase of a put option in anticipation of a price decline in the stock of Carlisle, Inc. The option to sell 100 shares of Carlisle, Inc., at any time during the next 90 days at a strike price of $44 can be purchased for $383. The stock of Carlisle is currently selling for $45.54 per share. a. Ignoring any brokerage fees or dividends, what profit or loss will Ed make if he buys the option and the lowest price of Carlisle stock during the 90 days is $45.54, $43.38, $40.78, and $35.59? b. What effect would the fact that the price of Carlisle's stock slowly rose from its initial $45.54 level to $54.85 at the end of 90 days have on Ed's purchase? c. In light of your findings, discuss the potential risks and returns from using put options to attempt to profit from an anticipated decline in share price. a. The profit (loss) Ed will make if he buys the option and the lowest price of Carlisle stock during the 90 days is $45.54 is $ (Round to the nearest dollar. Enter a negative number for a loss.) The profit (loss) Ed will make if he buys the option and the lowest price of Carlisle stock during the 90 days is $43.38 is $ (Round to the nearest dollar. Enter a negative number for a loss.) The profit (loss) Ed will make if he buys the option and the lowest price of Carlisle stock during the 90 days is $40.78 is $ (Round to the nearest dollar. Enter a negative number for a loss.) The profit (loss) Ed will make if he buys the option and the lowest price of Carlisle stock during the 90 days is $35.59 is $ (Round to the nearest dollar. Enter a negative number for a loss.) b. What effect would the fact that the price of Carlisle's stock slowly rose from its initial $45.54 level to $54.85 at the end of 90 days have on Ed's purchase? (Select the best answer below.) A. The option can be rolled over to the next period at a fee. B. The option would be sold to recover the investment. C. The option would not be exercised above the striking price. D. The option would be exercised at a loss. c. In light of your findings, discuss the potential risks and returns from using put options to attempt to profit from an anticipated decline in share price. "If the price of the stock rises above the striking price, the risk is limited price put option." Is the above statement true or false? (Select from the drop-down menu.)

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