Start with the partial model in the file IFM9 Ch06 P7 Build a Model.xls from the ThomsonNOW Web site. Rework given Problem. Then work the next two parts of this problem given below.

a. Construct data tables for the exercise value and Black-Scholes option value for this option, and graph this relationship. Include possible stock price values ranging up to $30.00.

b. Suppose this call option is purchased today. Draw the profit diagram of this option position at expiration.

Problem :
Define each of the following terms:
a. Option; call option; put option

b. Exercise value; strike price

c. Black-Scholes Option Pricing Model.