7. In the following market, K = 2, N = 1,7 = 1/9, So = 5, S. (W1) = 20/3, S1 (wa) = 40/9. (a) A call option has K = 3. What is its time 0 price? What is the replicating strategy H? (b) A put option has K = 7. What is its time 0 price? What is the replicating strategy H? (C) Suppose the interest rater is a scalar, and let c and p denote the prices of a call and put, respectively, both having the same strike price K. Show that the put-call parity holds, K c-p=So 1+r 7. In the following market, K = 2, N = 1,7 = 1/9, So = 5, S. (W1) = 20/3, S1 (wa) = 40/9. (a) A call option has K = 3. What is its time 0 price? What is the replicating strategy H? (b) A put option has K = 7. What is its time 0 price? What is the replicating strategy H? (C) Suppose the interest rater is a scalar, and let c and p denote the prices of a call and put, respectively, both having the same strike price K. Show that the put-call parity holds, K c-p=So 1+r