Consider a call option selling for $7 in which the exercise price is $100 and the price of the underlying is $98.

a) Determine the value at expiration and the profit for a buyer under the following outcomes:

i). The price of the underlying at expiration is $102.

ii). The price of the underlying at expiration is $94. ( 4 marks )

b) Determine the value at expiration and the profit for a seller under the following outcomes:

i). The price of the underlying at expiration is $91.

ii). The price of the underlying at expiration is $101. ( 4 marks )

c) Determine the following:

i). The maximum profit to the buyer (maximum loss to the seller).

ii). The maximum loss to the buyer (maximum profit to the seller).

( 4 marks )

d) Determine the breakeven price of the underlying at expiration.

( 3 marks)