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An investor buys a European put on a share of $4. The stock price is $45 and the strike price is $42. Fill the table and answer. (25 points)
| Stock price (ST) in the market | $30 | $35 | $40 | $42 | $45 | $50 | $55 |
| Option value (Pay off) | | | | | | | |
| Premium | | | | | | | |
| Profit | | | | | | | |
a) Under what circumstances does the investor make a profit?
b) Under what circumstances will the option be exercised?
c) What is the maximum profit an investor can make if he/she buys this put option?
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