1. A stock is trading at $50. It is known that at the end of 2 months it will be either $53 or $48. Each risk-free bond pays $1 in 2 months. The continuously compounded risk-free interest rate is 10%. a) (1.5 points) A two-month European call option has a strike price of $49. How do you use stock and bond to replicate its payoff? What should be its price? b) (1.5 points) A two-month European put option has a strike price of $50. How do you use stock and bond to replicate its payoff? What should be its price? 1. A stock is trading at $50. It is known that at the end of 2 months it will be either $53 or $48. Each risk-free bond pays $1 in 2 months. The continuously compounded risk-free interest rate is 10%. a) (1.5 points) A two-month European call option has a strike price of $49. How do you use stock and bond to replicate its payoff? What should be its price? b) (1.5 points) A two-month European put option has a strike price of $50. How do you use stock and bond to replicate its payoff? What should be its price