MLK [4]

The current price of security MLK is 78. Next period the security will either be worth 120 or 90. The risk free interest rate is 33.33%. There are two digital options traded.

One pays $1 if MLK is at 120 next period. This option is trading at 0.35. The other pays $1 if MLK is at 90 next period. This option is trading at 0.40.

1. Price a put option on MLK with exercise price K = 90.

2. Price a put option on MLK with exercise price K = 100.

3. Price a call option on MLK with exercise price K = 100.

4. Price a call option on MLK with exercise price K = 120.