How do your estimates compare with the actual quoted prices? Can you explain the differences? Assuming your prices are correct, which options would you buy or sell?

Exhibit 1 ITO'S DILEMMA Weekly Prices and Returns for Duke Energy. IBM and Microsoft Retums (In Duke Energy IBM Week No. Prices Duke Energs IBM Close Close Date Microsoft Microsoft Close Exhibit 2 ITO'S DILEMMA Option Premium and Market Data for February 20, 2001 Call Premiums Put Premiums Mar Apr July Mar Apr July 1.30 2.25 40 42.5 45 4.30 3.90 2.40 2.70 1.25 5.30 4.80 3.30 0.75 2.40 100 110 120 12.00 4.40 1.10 69.13 72.44 71.00 70.63 70.19 69.31 64.19 63.25 60.31 55.56 53.75 65.19 67.69 68.25 67.38 69.06 69.94 56.63 54.44 49.19 46.44 49.13 43.38 53.50 61.00 14.10 8.10 3.60 18.70 11.40 7.50 2.20 5.30 12.20 1 2 3 4 5 6 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 4.30 8.10 13.90 31-Jul-00 07-Aug-00 14-Aug-00 21-Aug-00 28-Aug-00 04-Sep-00 11-Sep-00 18-Sep-00 25-Sep-00 02-Oct-00 09-Oct-00 16-Oct-00 23-Oct-00 30-Oct-00 06-Nov-00 13-Nov-00 20-Nov-00 27-Nov-00 04-Dec-00 11-Dec-00 18-Dec-00 25-Dec-00 01-Jan-01 08-Jan-01 15-Jan-01 22-Jan-01 29-Jan-01 05-Feb-01 12-Feb-01 19-Feb-01 Duke Energy 42.27 42.27 42.27 IBM 108.90 108.90 108.90 Microsoft 55.19 55.19 55.19 7.00 10.50 15.60 33.16 33.58 34.32 34.75 36.89 39.64 40.10 37.44 42.32 40.37 42.00 42.59 40.95 41.97 43.17 43.83 42.71 43.33 42.59 41.06 41.96 36.25 41.10 34.83 36.16 38.24 37.33 41.02 41.16 42.27 115.47 120.34 120.15 128.69 133.30 129.19 124.70 123.58 112.35 115.72 108.80 94.52 93.46 99.88 92.89 101.82 99.82 95.52 96.89 87.71 88.90 93.89 84.72 93.71 111.12 114.06 110.14 112.00 115.00 108.90 7.27% 1.25% 2.18% 1.25% 5.96% 7.20% 1.14% -6.86% 12.25% -4.72% 3.97% 1.39% -3.91% 2.45% 2.83% 1.51% -2.58% 1.44% -1.73% -3.64% 2.17% -14.63% 12.54% -16.55% 3.76% 5.59% -2.42% 9.44% 0.34% 2.66% 3.57% 4.13% -0.16% 6.87% 3.52% -3.14% -3.54% -0.90% -9.52% 2.95% -6.17% -14.07% -1.13% 6.65% -7.25% 9.18% -1.98% 4.41% 1.43% -9.95% 1.34% 5.47% -10.29% 10.09% 17.05% 2.61% -3.49% 1.67% 2.64% 5.45% -0.81% 4.68% -2.00% -0.53% -0.62% -1.25% -7.68% -1.47% -4.76% -8.20% -3.32% 19.29% 3.76% 0.83% -1.29% 2.47% 1.26% -21.12% -3.94% -10.14% -5.75% 5.63% -12.45% 20.98% 13.12% 4.80% -5.11% -2.81% -3.11% -3.78% 50 55 60 6.50 3.00 0.94 8.13 4.50 2.38 10.00 6.88 4.50 1.19 2.69 5.38 2.50 4.13 6.75 4.00 6.00 8.13 T-bill rates Expiration date Days to expiration 4.92% 17-Mar 25 4.85% 21-Apr 60 4.91% 21-Jul 151 4.92% 4.85% 17-Mar 21-Apr 25 60 4.91% 21-Jul 151 64.00 60.81 59.13 57.31 55.19 Weekly Sigma of Retums Annualized standard deviation of returns 6.34% 45.75% 6.69% 48.24% 8.26% 59.56% Exhibit 1 ITO'S DILEMMA Weekly Prices and Returns for Duke Energy. IBM and Microsoft Retums (In Duke Energy IBM Week No. Prices Duke Energs IBM Close Close Date Microsoft Microsoft Close Exhibit 2 ITO'S DILEMMA Option Premium and Market Data for February 20, 2001 Call Premiums Put Premiums Mar Apr July Mar Apr July 1.30 2.25 40 42.5 45 4.30 3.90 2.40 2.70 1.25 5.30 4.80 3.30 0.75 2.40 100 110 120 12.00 4.40 1.10 69.13 72.44 71.00 70.63 70.19 69.31 64.19 63.25 60.31 55.56 53.75 65.19 67.69 68.25 67.38 69.06 69.94 56.63 54.44 49.19 46.44 49.13 43.38 53.50 61.00 14.10 8.10 3.60 18.70 11.40 7.50 2.20 5.30 12.20 1 2 3 4 5 6 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 4.30 8.10 13.90 31-Jul-00 07-Aug-00 14-Aug-00 21-Aug-00 28-Aug-00 04-Sep-00 11-Sep-00 18-Sep-00 25-Sep-00 02-Oct-00 09-Oct-00 16-Oct-00 23-Oct-00 30-Oct-00 06-Nov-00 13-Nov-00 20-Nov-00 27-Nov-00 04-Dec-00 11-Dec-00 18-Dec-00 25-Dec-00 01-Jan-01 08-Jan-01 15-Jan-01 22-Jan-01 29-Jan-01 05-Feb-01 12-Feb-01 19-Feb-01 Duke Energy 42.27 42.27 42.27 IBM 108.90 108.90 108.90 Microsoft 55.19 55.19 55.19 7.00 10.50 15.60 33.16 33.58 34.32 34.75 36.89 39.64 40.10 37.44 42.32 40.37 42.00 42.59 40.95 41.97 43.17 43.83 42.71 43.33 42.59 41.06 41.96 36.25 41.10 34.83 36.16 38.24 37.33 41.02 41.16 42.27 115.47 120.34 120.15 128.69 133.30 129.19 124.70 123.58 112.35 115.72 108.80 94.52 93.46 99.88 92.89 101.82 99.82 95.52 96.89 87.71 88.90 93.89 84.72 93.71 111.12 114.06 110.14 112.00 115.00 108.90 7.27% 1.25% 2.18% 1.25% 5.96% 7.20% 1.14% -6.86% 12.25% -4.72% 3.97% 1.39% -3.91% 2.45% 2.83% 1.51% -2.58% 1.44% -1.73% -3.64% 2.17% -14.63% 12.54% -16.55% 3.76% 5.59% -2.42% 9.44% 0.34% 2.66% 3.57% 4.13% -0.16% 6.87% 3.52% -3.14% -3.54% -0.90% -9.52% 2.95% -6.17% -14.07% -1.13% 6.65% -7.25% 9.18% -1.98% 4.41% 1.43% -9.95% 1.34% 5.47% -10.29% 10.09% 17.05% 2.61% -3.49% 1.67% 2.64% 5.45% -0.81% 4.68% -2.00% -0.53% -0.62% -1.25% -7.68% -1.47% -4.76% -8.20% -3.32% 19.29% 3.76% 0.83% -1.29% 2.47% 1.26% -21.12% -3.94% -10.14% -5.75% 5.63% -12.45% 20.98% 13.12% 4.80% -5.11% -2.81% -3.11% -3.78% 50 55 60 6.50 3.00 0.94 8.13 4.50 2.38 10.00 6.88 4.50 1.19 2.69 5.38 2.50 4.13 6.75 4.00 6.00 8.13 T-bill rates Expiration date Days to expiration 4.92% 17-Mar 25 4.85% 21-Apr 60 4.91% 21-Jul 151 4.92% 4.85% 17-Mar 21-Apr 25 60 4.91% 21-Jul 151 64.00 60.81 59.13 57.31 55.19 Weekly Sigma of Retums Annualized standard deviation of returns 6.34% 45.75% 6.69% 48.24% 8.26% 59.56%