Question#1: On the last day of October, Bruce Springsteen is considering the purchase of 100

shares of Olivia Corporation common stock selling at $37.5 per share and also considering an Olivia

option.

Call Puts

PriceDecemberMarchDecember March

35 3.75 51.252

40 2.5 3.5 4.54.75

a) If Bruce decides to buy a March call option with an exercise price of 35, what is his dollar

gain (loss) if he closes his position when the stock is selling at 43.5?

b) If Bruce buys a March put option with an exercise price of 40, what is his dollar gain (loss)

if he closes his position when the stock is selling at 43.5?