Suppose you believe that the price of a particular underlying, currently selling at $99

Suppose you believe that the price of a particular underlying, currently selling at $99, will decrease considerably in the next six months. You decide to purchase a put option expiring in six months on this underlying. The put option has an exercise price of $95 and sells for $5.

A. Determine the profit for you under the following outcomes for the price of the underlying six months from now:

i. $100

ii. $95

iii. $93

iv. $90

v. $85

B. Determine the breakeven price of the underlying at expiration. Check that your answer is consistent with the solution to Part A of this problem.

C. i. What is the maximum profit that you can have?

ii. At what expiration price of the underlying would this profit be realized?

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