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A put is the option to sell stock at $35. The price of the stock is $34, and the price of the put is $2.
a. What is the intrinsic value of the put?
b. What is the time premium paid for the put?
c. What is the percentage return from purchasing the put if at the expiration of the put the price of the stock is $31?
Par Value
The face value of a bond or stock as stated on the certificate or instrument.
Fair Value
An estimate of the market value of an asset or liability, based on current conditions and knowledge, used in financial reporting and analysis.
Undervalued
Describes an asset or company being priced below its true intrinsic or market value.
Overvalued
Overvalued describes a situation where the market price of an asset is higher than its intrinsic value, often due to speculation or overestimation of its financial performance.
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