Q14.4 Using the resources available at your campus or the Internet, complete each of the following tasks. (Note: Show your work for all calculations.)

a. Find an in-the-money call that has two or three months to expiration. (Select an equity option that is at least $2 or $3 in-the-money.) What’s the fundamental value of this option and how much premium is it carrying? Using the current market price of the underlying share (the one listed with the option), determine what kind of dollar and percentage return the option would generate if the underlying share goes up by 10%. How about if the share goes down by 10%?

b. Repeat part

a, but this time use an in-the-money put that has two or three months to expiration. Answer the same questions as above.