A company XYZ awarded an employee 1,000 stock options with a strike price $150 with a term of 10 years. The vesting period is 4 years. That is, suppose you were hired in Jan 2015 , you were granted the right to buy 1,000 shares at $150 after Jan 2019 and before Jan 2025 . Suppose the stock price is $175 today, and you are considering the following possible actions: a. Do nothing now and decide whether to exercise the option just before expiration. b. Exercise the option now and keep the stock until expiration c. Exercise the option now and sell the stock immediately For simplicity, assume zero interest rate, no dividend, and no tax liability. 1). What is the net profit for each action when the stock price at the expiration is $200 and $100, respectively? [3 points each] Points possible: 18 2). Think about the pros and cons of Action (a) vs. Action (b). What one is better? [2 points] Action (a) always give equal or higher profit than Action (b) Action (b) always give equal or higher profit than Action (a) The comparison between these two depend on the realized prices Points possible: 18 4). In this class, we will learn how to calculate the value of option. For now, we take these values as given a). Assume that the calculated fair value of ESOs today is $35 and the stock price is $175. What is the time value component of your ESOs? [6 points] Points possible: 6 b). Assume that the calculated fair value of ESOs today is $8 and the stock price is $130. What is the time value component of your ESOs ? [6 points]