1. Compute the price of an American call option with strikeK=110and maturityT=.25years.

2.Compute the price of an American put option with strikeK=110and maturityT=.25years.

3. Is it ever optimal to early exercise the put option of Question 2? YES OR NO

4.If your answer to Question 3 is "Yes", when is the earliest period at which itmight

be optimal to early exercise? (If your answer to Question 3 is "No", then you should

submit an answer of 15 since exercising after 15 periods is not an early exercise.

5.Do the call and put option prices of Questions 1 and 2 satisfy put-call parity?

Yes

No

6.Compute the fair value of an American call option with strikeK=110and maturity

n=10periods where the option is written on a futures contract that expires after

15 periods. The futures contract is on the same underlying security of the previous

questions.

7.What is the earliest time period in which youmightwant to exercise the American

futures option of Question 6?

8.Compute the fair value of achooseroption which expires aftern=10periods. At

expiration the owner of the chooser gets to choose (at no cost) a European call option

or a European put option. The call and put each have strikeK=100and they mature

5 periods later, i.e. atn=15.