3. [Exercise 1 in section 2.4 of the text (page 28).] Consider a single period CRR model with So = $100, S1 = $200 or $50, r = 0.25. (a) Find the arbitrage free price of a European call option for one share of stock where the strike price is K = $100 and the exercise time T = 1. (b) Find a hedging strategy that replicates the value of the option described in (a). (c) Suppose the option in (a) is initially priced at $1 above the arbitrage free price. Describe a strategy (for trading in stock, bond and the option) that is an arbi- trage. (d) What is the arbitrage free initial price for a put option with the same strike price and exercise time as the call option described in (a)