1. Define each of the following terms:Call optionPut optionStrike price or exercise priceExpiration dateExercise valueOption priceTime valueWriting an optionCovered optionNaked optionIn-the-money callOut-of-the-money callLEAPS2. The current price of a stock is $50. In 1 year, the price will be either $65 or $35. The annual risk-free rate is 10%. Find the price of a call option on the stock that has an exercise price of $55 and that expires in 1 year. (Hint: Use daily compounding.)3. The exercise price on one of Chrisardan Company’s call options is $20, its exercise value is $27, and its time value is $8. What are the option’s market value and the price of the stock?