a) Starting from the formula for the price of a call option given in Proposition 13.1, use putcall parity to derive the formula just given for the price of a put option. ( 5 marks) b) Consider a one-period binomial model of a stock whose current price is 40 . Suppose that: - over the single period under consideration, the stock price can either move up to 60 or down to 30 - the actual probability of an up-movement is equal to 1/2 - the continuously-compounded risk-free rate of return is 5% per time period - we wish to find the current value of a one-period European call option, V0, that has an exercise price of 45 . (i) calculate the call option price. ( 5 marks) ii) Find the constituents of the replicating portfolio (x,y) and show that it costs 5.732 to set up this portfolio