1. Jason purchased a six-month put on ABC stock at a cost of $100. The strike price was $15. At what market price does Jason just break-even on this investment? Explain.
2. Leverage is compared to a fulcrum in that you need just the right balance of leverage. That would seem to indicate that there is a point where the leverage is just right and that too little leverage may be just as harmful as too much leverage. Do you think this is true?
3. How would bad news regarding a firm affect the price of a put option? Explain.