Problem 1. Should you exercise your option? Would it have been better to make a direct investment in the stock? Please phrase your answers in terms of percentage of gain/loss so that number of shares purchased is irrelevant. (a) Suppose a European Call option costs $10 with a strike price of $300. The current price of the share is $280. (i) The stock price on the exercise date increases by 2%. (ii) The stock price on the exercise date increases to $300. (iii) The stock price on the exercise date decreases by 1%. (b) What would you do if instead of a call option, the derivative was a put option