A stock currently trades at $45, but may increase to $60 or fall to $35 over the next year. The risk-free rate is 5%. Using the binomial method, value a call option and a put option, both with X= $50. Then verify that the prices you obtained satisfy put/call parity. Now suppose that the actual market price of the call option with X = $50 was $5. Demonstrate that you could engage in arbitrage to take advantage of this mispricing.