An investor is very bullish on LewCo, a nondividend paying company. The current spot price of the company's equity is $50 per share. The investor is confident the company will solve the social distancing issue and that the value of the stock will be at least $100 in 12 months. The investor uses a 12-period binomial tree assuming So = $50 T = 12 months r= 30 basis points per month u=1.1 per month d=1/u= 1.1-per month 4. Why do investors use options? To answer this, we consider an investor with $5,000 to invest. Assume the spot price in 12 months is $100, as predicted by the investor. Calculate the amount the investor will make spending the $5,000 to buy shares of stock, spending the $5,000 to buy puts with a strike of $100, or spending the $5,000 to buy calls with a strike of $100? Based on this analysis, what is the advantage of using options? 5. What would be the premium of a derivative structure paying the square of the call payoff in each node of the terminal distribution? An investor is very bullish on LewCo, a nondividend paying company. The current spot price of the company's equity is $50 per share. The investor is confident the company will solve the social distancing issue and that the value of the stock will be at least $100 in 12 months. The investor uses a 12-period binomial tree assuming So = $50 T = 12 months r= 30 basis points per month u=1.1 per month d=1/u= 1.1-per month 4. Why do investors use options? To answer this, we consider an investor with $5,000 to invest. Assume the spot price in 12 months is $100, as predicted by the investor. Calculate the amount the investor will make spending the $5,000 to buy shares of stock, spending the $5,000 to buy puts with a strike of $100, or spending the $5,000 to buy calls with a strike of $100? Based on this analysis, what is the advantage of using options? 5. What would be the premium of a derivative structure paying the square of the call payoff in each node of the terminal distribution