: Suppose that price of gold is AED4100/ounce on October 20, 2012. Rado Watch Company (RWC) enters May, 2013 European option contract to BUY 1 ounce of gold from Julian Mines at AED4120/ounce on May 30, 2013. Here RWC BUYS the option by paying an option premium of AED10. Suppose that price of the gold on May 30, 2013 is any one from the followings: AED4060/ounce, AED4080/ounce, AED4100/ounce, AED4120/ounce, AED4140/ounce, AED4160/ounce and AED4180/ounce. (5) What kind of option is this? (6) Construct the pay off table for the long and short positions for this contract. (7) Construct the pay off graph for the long and short positions in this contract. (8) Do both graph signal something about strike price? (9) Do these graphs tell something about the relationship between long and short position in terms of gains and losses? (10) What will be the Break-even point? (for call K+F, for Put K-f)