(a) Construct a binominal option pricing model to calculate the value of a European style call option with the following information;

Exercise price	RM32
Volatility	15%
Probability (up and down)	50%
Risk free rate	6%
per annum Price movement	3 times

(15 marks)

(b) You are a stock analyst that expected the market will go bearish. Advise your friend Cindy on the different in return on stock purchase in the stock market versus option market, given the position;

Short stock, RM12.00

Long put, RM12.00 put @ 0.15

(i) Build a table based on the above information. (4 marks)

(ii) Explain table (i). (6 marks)