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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?
Monopolistic Competitor
A firm operating in a market with many competitors but differentiating its product or services from others, thus having some degree of market power.
Price Discrimination
A strategy where a company sells the same product at different prices to different customers, not based on costs but typically on willingness or ability to pay.
Monopolistically Competitive Industry
An industry characterized by many firms offering products that are similar but not perfect substitutes, leading to competitive markets where companies compete on product differentiation, prices, and marketing.
Demand Curve
A graphical representation showing the relationship between the price of a good and the quantity of that good demanded by consumers.
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