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Suppose the stock price is $40 and the effective annual interest rate is 8%. 1. Draw on a single graph payoff and profit diagrams for

Suppose the stock price is $40 and the effective annual interest rate is 8%. 1. Draw on a single graph payoff and profit diagrams for the following options: 35-strike call with a premium of $9.12. 40-strike call with a premium of $6.22. 45-strike call with a premium of $4.08. 2. Consider your payoff diagram with all three options graphed together. Intuitively, why should the option premium decrease with the strike price

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