5. Suppose a stock, not paying any dividend, is currently trading at $50. The annual volatility of its price is 31.55%. This implies that in a one period binomial tree model the stock price will either be $62.5 or $40 in six months. The annual interest rate is 5% with continuous compounding. Consider a European call option with strike price equal to $50 and maturity in six months.

(a). Draw the one period trees for stock and bond.