$1)$ Suppose a European call option on a Sainsbury$$s share with the exercise

price of $2\mathrm{.}85$ costs $0\mathrm{.}25$ and is held until expiry.

a$)$ Ignoring the time value of money, under what circumstances will the

buyer of the option $($the party with the long position$)$ make a profit?

b$)$ Explain under what circumstances the option will be exercised.

c$)$ Draw a diagram illustrating how a profit from a long position in the

option depends on the stock price at the expiration date of the option.