A stock is currently $115. It is known that in 8 months it will be either $133 or $102. The risk-free interest rate is 2% per annum with continuous compounding for all maturities.

a. Using a binomial tree compute the value of a 8-month European call with a strike price of $110.

b. Using a binomial tree compute the value of a 8-month European put with a strike price of $110.

c. Verify that the European call and European put prices satisfy the

put-call parity.