On 8 March 2014, Kellogg stock closed at $52. For $2.90 you can buy a call option on Kellogg with an exercise price of $45. The option expires on 18 September 2014.

(a) What right does this call option give you?

(b) Suppose you buy the call option and hold until the expiration date. If the share price on September 18th is $52, will you exercise the option? What will be your profit?

(c) If the share price on September 18th is $38, will you exercise the option? What will be your profit?

Suppose it is 18 April 2014 youve just bought one call option on ForeverYours. The option cost you 5, expires on 18 June 2014, and has an exercise price of 18.

(i) Complete the Excel table below.

(ii) Make a graph showing the profit (Column C) on the y-axis and the stock price on 18 June 2014 (column A) on the x-axis.

	A	B	C
1	Forever yours stock price 18/6/2014	Exercise the call option	Profit
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