A stock price is currently $50. Over each of the next two three-month periods it is expected to go up by 8% or down by 6%. The risk-free interest rate is 7% per annum with continuous compounding.

a) What is the value of a six-month European put option with a strike price of $48?

b) For the situation considered in Question 6, verify that the European call and European put prices satisfy putcall parity