1. Answer the following questions as they relate to implied volatility in option pricing.
   1. What are implied volatilities? Can implied volatilities be expected to vary for options on the same stock with the same expiration price but different expiration dates? Why or why not? (10 marks)
   2. Why and how are implied volatilities used to quote option prices? (5 marks)
   3. It is known that a company is bidding for a very large profitable contract. If they win the contract, their share price is likely to rise. However, if they lose the contract, then their share price will fall. How would you try to profit from those scenarios using an option trading strategy? (10 marks)