Question: Ms. Higden has been offered yet another incentive scheme (see Section 20.2). She will receive a bonus of $500,000 if the stock price at the

Ms. Higden has been offered yet another incentive scheme (see Section 20.2). She will receive a bonus of $500,000 if the stock price at the end of the year is $120 or more; otherwise she will receive nothing.

(a) Draw a position diagram illustrating the payoffs from such a scheme.

(b) What combination of options would provide these payoffs?

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