Can anyone be so kind as to explain question 112 on Schweser Exam 2 Afternoon? The answer is below: The correct answer was A) VT = ST + Max(0,X – ST) VT = $0.70 + Max(0,0.75 – 0.70) = $0.75 π = VT – V0 – 0.75 – (S0 + P0) = $0.75 – (0.67 + 0.14) = –$0.06 Professor’s Note: Here is how a put works. Assume a share of stock and a put on it at $75 have a combined cost of $81. If the stock price at expiration is $75 or less, the put is exercised and the stock sold for $75. The loss is $6.
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