Q4) The diagram below is a European call option on stock with strike price (K)= $80, initial cost=$10 and option life of 3 months. Explain in details whether the holder of this option will exercise his option and achieve net profit knowing that the profit is the final payoff minus the initial cost = S_T - K- premium, when: - The market price of the underlying stock (S_T) reaches ($75) at maturity date of the option? The market price of the underlying stock (S_T) reaches ($110) at maturity date of the option?

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30 20 Profit ($) 10 0 the 50 60 70 80 90 100 110 -10 ST=Stock Price $