1. KZMM.com's stock is trading at 50 per share. The stock price will either go up or go down by 20% in each of the next two years. The annual interest rate is 10%. (a) Determine the price of a two-year European call option with strike price 45. Do not calculate the replicating portfolio strategy. (b) Determine the price of a two-year European put option with strike price 45. Do not use put-call parity; you will be asked to verify that it holds in part (c). Also, do not calculate the replicating portfolio strategy; you will be asked to do that in part (d). (c) Verify that put-call parity holds (at the initial node as well as at the intermediate nodes). (d) What is the replicating portfolio strategy, using the stock and the bond, for the European put option with strike price 45? Compute the portfolio for every node of the tree. Assume that the bond has face value equal to 1. 1. KZMM.com's stock is trading at 50 per share. The stock price will either go up or go down by 20% in each of the next two years. The annual interest rate is 10%. (a) Determine the price of a two-year European call option with strike price 45. Do not calculate the replicating portfolio strategy. (b) Determine the price of a two-year European put option with strike price 45. Do not use put-call parity; you will be asked to verify that it holds in part (c). Also, do not calculate the replicating portfolio strategy; you will be asked to do that in part (d). (c) Verify that put-call parity holds (at the initial node as well as at the intermediate nodes). (d) What is the replicating portfolio strategy, using the stock and the bond, for the European put option with strike price 45? Compute the portfolio for every node of the tree. Assume that the bond has face value equal to 1