A stock price is currently $100. Over each of the next two six-month periods it is expected to go up by 10% or down by 10%. The risk-free interest rate is 8% per annum with annual compounding interest.

(i) How would you strategize your hedging of a one-year European call option with an exercise price of $80? Explain you answer and present them in a binomial model diagram.

(ii) With the value of call option calculated in i) estimate the value of a one-year European put option that has the same strike price and the same expiration date assuming that there is no arbitrage opportunity.