On the last day of October, you are considering the purchase of 100 shares of A Corporation common stock selling at $37 1/2 per share and also considering an A Corporation option.

Price Calls Puts

Dec Mar Dec Mar

35 3-3/4 5 1-1/4 2

40 2-1/2 3-1/2 4-1/2 4-3/4

a.If you decide to buy a March call option with an exercise price of 35, what is your dollar gain (loss) if you close your position when the stock is selling at 43 1/2? Why?

b.If you but a December put option with an exercise price of 40, what is the gain/loss if you close position when stock is trading at $33.5? Why?