4. Consider a European call option on a non-dividend-paying stock where the stock price is $40, the strike price is $40, the risk-free rate is 4% per annum, the volatility per annum is 30% per annum, and the time to maturity is 6 months. Calculate u, d, and p for a one-step tree Calculate the probability of an up move and a down move. Value the option using a one-step tree. Use put-call parity to value a put option with the same exercise price and expiry date. Calculate the delta of the call option and interpret. Calculate the elasticity of the call option and interpret. Calculate the volatility of the call option. a. b. c. d. e. f. g. 2 | P age FARE*4240 Futures and Options Markets - W19 Review Questions lI h. Would you answer in (b) change (up or down) if the volatility per annum is 50% per annum? Please show your work