A non-dividend paying stock, currently priced at 140, is expected to go up by 10% or go down by 10% over a period. The risk free rate for one period is 4%. Build the tree!

Su=

Sd=

The payoff of a call with X=$120 at expiration is:

C_u=

C_d=

The risk neutral probability is ____.

The value of the call today is _____.

To make hedge portfolio, you will need to buyshares for 1000 calls(write: written/purchased).

The value of the hedge portfolio today is _____and its value one period from now is _____.

If the call was overpriced at $26, you could earn a return of_____% (round to two decimals).