A put option has an exercise price of 40 and the put, Financial Management

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A put option has an exercise price of 40 and the put

A put option has an exercise price of $40 and the put premium is $5. The current market price of the underlying stock is $38.

A. Is the option in the money or out of the money?

B. What is the intrinsic value of the option? The time value?

C. What is the break-even stock price on the option’s expiration date?

D. If you purchase this option, what is your maximum possible gain?

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Financial Management: A put option has an exercise price of 40 and the put

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