John is the manager of Fidelity Fund, a prominent hedge fund in Hong Kong. He has a very positive view about the future share price of China Mobile and would like to use call options to increase the earnings. The call option, with an exercise price of $100 and $5 premium, expires in one month. Before buying the options, John would like to have a better understanding about the profit and loss behavior of this financial derivative. Required: (a) With exercise price of $100 and premium of $5, identify item (i) to (iv) in the below table regarding the profit or loss of owning China Mobile's call option. Stock price at Profit or loss of option expiration (ST) owing a call option $110 $105 $100 $95 (b) Based on your answer in part (a), draw the profit or loss graph for the purchase of China Mobile's call option. In your graph, clearly indicate the break-even point, the maximum loss, the maximum profits and the exercise price of the call option. (c) Discuss three factors that will affect the value of a call option