$3.$ Suppose both call and put options for Microsoft $($MSFT$)$ expiring in $3$ months are available for trade. Both options currently have the same strike price of $$305.$

a$.$ If an investor buys the call option for $$16$ today, should the investor execute the option if the market price for MSFT is $$350$ when the option is about to expire? What is his$/$her profit or loss?

b$.$ Continuing from $($a$),$ what if the price for MSFT is $$290$ instead?

c$.$ If an investor buys the put option for $$18$ today, should the investor execute the option if the market price for MSFT is $$290$ when the option is about to expire? What is his$/$her profit or loss?

$4.$ In this question you will construct a stock price index from the prices of two different stocks of your choice. Please download $(1)$ the stock prices for both companies today, $(2)$ the stock prices for both companies a month ago, as well as $(3)$ the market capitalization for both companies today. Please also specify the companies you picked and the date when you retrieve the data.

a$.$ Construct a price$-$weighted index of the two stocks and calculate the monthly return $($ignoring the dividend yield for simplicity$).$ Show your calculations.

b$.$ Use the market capitalization today to construct a value$-$weighted index of the five stocks and calculate the monthly return. Show your calculations.

c$.$ Use $1-2$ sentences to explain why the returns in parts $($a$)$ and $($b$)$ differ.

You may complete the question either by hand or on an Excel spreadsheet. If you choose to do it on a spreadsheet, please attach the spreadsheet along with your response.