11. Option combinations (S21-2) Ms. Higden has been offered yet another incentive scheme

(see Section 21-2). She will receive a bonus of $500,000 if the share price at the end of the year is $120 or more; otherwise she will receive nothing. (Don’t ask why anyone should want to offer such an arrangement. Maybe there’s some tax angle.)

a. Draw a payoff diagram illustrating the payoffs from such a scheme.