Option Pricing You have decided that you have $12,000 to invest in the stock market and that Apple stock would be the best investment for you. It is currently trading at $120.00 per share but has been...

Option Pricing You have decided that you have $12,000 to invest in the stock market and that Apple stock would be the best investment for you. It is currently trading at $120.00 per share but has been very volatile this past year. Instead of buying it outright, you have decided to buy a “call” option on the Apple stock. The price for a call option on Apple stock is $3.50 per share, and the strike price (the price that you can purchase it at) is $126.00 per share. The option will be valid for six months. You do not have to exercise the option, but if you do not, you lose the price of your call option ($3.50). 1. At what price will Apple stock have to rise to for you to decide to exercise your call option (ignoring taxes and brokerage commissions on the trade)? 2. At what price will it have to rise to for you to break even on the decision to exercise the option? 3. If Apple stock declines over the next six months and you decide not to exercise your call option, how much money will you lose?