Nico Yong is considering the purchase of 100 shares of Cisco Systems stock at $22 per share. Because the economy is picking up, Nico believes the demand for Cisco's routers will increase substantially causing the price of Cisco's shares to increase to $30 per share. As an alternative, Nico is considering the purchase of a call option for 100 shares of Cisco at with an exercise price of $25. This 180 day option will cost Nico $200. Assume no brokerage costs or dividends.

(a)	What will Nico's profit be on the stock transaction if he decides to buy the stock and its price

does increase to $30 per share and he sells?

(b)	How much will Nico earn on the option transaction if he purchases the option and the

underlying stock price rises to $30?

(c)	How much must the stock price rise for Nico to break even on the option transaction?

(d)	Based on parts (a) and (b) above, what should Nico do? Explain.