1. PMN is currently trading for $58.30. If its March $57.50 strike putoption has a $2.75 premium and you want to purchase 5 contracts, briefly explain what that entitles you to do. What would your dollar maximum gain, maximum loss, and break-even price (stock price) be with this strategy (on a per share basis).
2. Goodfellas Personal Finance just paid a dividend of $20. Its dividends are expected to grow at a 50% annual rate for each of the next two years, and then settle down to a steady state 6% into the foreseeable future. If investors require a 15% rate of return, what should a share of Gooodfellas' stock sell for?