Consider the option with payoff f(S) = max(180-S, 0) + max(268-S, 0) + max(S-487,0). The option can be exercised on two dates, on date t=0 and t=1.

The stock price follows geometric Brownian motion, with r = 2%, = 18%, dividend = 1%. a)

On date t0, at what initial stock price are you indifferent between holding the option and exercising it now? If there is no such price (i.e., it is always optimal to exercise now, or you would never exercise now, indicate as such). b) If the current stock price is S(0) = 200, what is the price of the option?