Calculating Payoff s Use the option quote information shown here to answer the questions that follow. The stock is currently selling for $114.

Option and NY Close Expiration Strike Price Calls Puts Vol. Last Vol. Last Macrosoft February 110 85 7.60 40 .60 March 110 61 8.80 22 1.55 May 110 22 10.25 11 2.85 August 110 3 13.05 3 4.70

a. Suppose you buy 10 contracts of the February 110 call option. How much will you pay, ignoring commissions?

b. In part (a), suppose that Macrosoft stock is selling for $140 per share on the expiration date. How much is your options investment worth? What if the terminal stock price is $125? Explain.

c. Suppose you buy 10 contracts of the August 110 put option. What is your maximum gain? On the expiration date, Macrosoft is selling for $104 per share. How much is your options investment worth? What is your net gain?

d. In part (c), suppose you sell 10 of the August 110 put contracts. What is your net gain or loss if Macrosoft is selling for $103 at expiration? For $132? What is the break-even price—that is, the terminal stock price that results in a zero profit?