1. Suppose an asset is selling today for a price of $20. One year from today, it will be selling for either $30 or \$14. Assuming annual compounding, annual risk-free rate of 5% and a single-period binomial option pricing model: a. What is the price today of a one-year call option with a strike price of $22 ? b. What is the price today of a one-year put option with a strike price of $22 ? - For both 1.a. and 1.b., draw out the branches of the binomial tree and show your work, solving for today's option price. - For both problems, please identify the hedge ratios which create a risk-free payoff in both the up and down states