A one-step binomial tree is used to model the impact of an important announcement on the stock price of Company XYZ. There is a 50% chance that the announcement will be positive for the company. The Company does not pay dividends. Current stock price = K20 Stock price after good news = K30 Stock price after bad news = K15 Time period = 3 months Risk-free rate (continuous compounding) = 5% Calculate the price of a 3-month call option on the Company stock with strike price equal to K22. (b) Suppose you are a market-maker in the Luse Index forward contracts. The Luse Index spot price is K1, 100 and the annual risk free rate is 5%. Calculate the forward price for delivery in 9 months. i. If the actual forward price is K1,122, how can you take advantage on this situation? What are the problems that you will face in taking advantage of the situation?