3. A stock price is currently $100. Over each of the next two six-month periods it...

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3. A stock price is currently $100. Over each of the next two six-month periods it is expected to go up by 10% or down by 10%. The risk-free interest rate is 8% per annum with continuous compounding. What is the value of a one-year European call option with a strike price of $100? 4. For the situation considered in question 3, what is the value of a one-year European put option with a strike price of $100? Verify that the estimated European call and European put prices satisfy put-call parity. 3. A stock price is currently $100. Over each of the next two six-month periods it is expected to go up by 10% or down by 10%. The risk-free interest rate is 8% per annum with continuous compounding. What is the value of a one-year European call option with a strike price of $100? 4. For the situation considered in question 3, what is the value of a one-year European put option with a strike price of $100? Verify that the estimated European call and European put prices satisfy put-call parity.