4. Mr. Madoff wrote (sold) a put option on Google stock with strike price $480...
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4. Mr. Madoff wrote (sold) a put option on Google stock with strike price $480 per share and received the premium of $2.25. Answer the following question and always think about who will decide whether to strike or not to strike.
1) Suppose Google stock price is $460 before option expiration date. What would be Mr. Madoffs profit/loss?
2) Suppose Google stock price is $490 before option expiration date. What would be Mr. Madoffs profit/loss?
3) At what stock price will Mr. Madoff breakeven?
4) Draw the relationship between Mr. Madoffs profit/loss and Google stock price by changing stock price from $470 to $490.
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