I found some questions in my notes regarding intrinsic value but I still don\'t

Question

I found some questions in my notes regarding intrinsic value but I still don't know how to do this problem. I really have no idea how to do the graph.
will figure out a way to award a ton of points

3. Suppose that mid-east terrorists crashed a stolen corporate jet full of nerve gas into Disneyworld a) Explain the likely effects of this event on the intrinsic value of an S&P; 500 stock index call option that had a strike price equal to the value of the Index just prior to the attack. 4 pts b) Suppose that the current family of options mentioned on the S&P; 500 Index were due to expire two months after the terrorist attack. Explain the effects of the attack on the Time Value of call options on the S&P; 500 index immediately after the attack. Draw a diagram to illustrate your answer. Be sure to label your diagram clearly! 4pts.

Explanation / Answer

As terrorist attack will lead to decline in market, call intrinsic value will go down

After the attack volatility will increase and hence despite intrinsic value going down, call premium would go up suggesting increase in time value

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