Problem 1. A call option on Futura Corporation stock currently trades for $4. The expiration date is February 18 of next year. The exercise price of the option is $45.
a. If this is an American option, on what dates can the option be exercised?
b. If this is a European option, on what dates can the option be exercised?
c. Suppose the current price of Futura Corporation stock is $35. Is this option worthless?
Problem 2. The strike price of a call option on Simpsons Entertainment common stock is $50.
a. What is the payoff at expiration of this call if, on the expiration date, Simpsons stock sells for $55?
b. What is the payoff at expiration of this call if, on the expiration date, Simpsons stock sells for $45?