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Stock Options

(a) Explain what a put option is.

(b) Suppose that two years ago you had paid $5 for a put option with a strike price of$20, with an expiration date of two years. So far, you haven’t exercised the option.The stock is currently trading in the market for $19.30. Should you exercise your option? Why or why not?

(c) What is the intrinsic value of a call option that has a strike price of $50, if the market price is $45?

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