Suppose that six months ago, you paid $4.00 per share for a contract that gives you an option to purchase 100 shares of Apple stock for a price of $148.00 per share anytime in the next six months (i.e., the contract is expiring today). If the current market price of Apple is $151.14 per share, should you exercise the contract?

(a) Would you decision change if you had only paid $1.00 per share for the contracts?

(b) How would your decision be affected if you expect Apple stock to rise sharply over the next few months?

(c) How would your decision be affected if you expect Apple stock to fall sharply over the next few months?