Consider a European call option on a stock, with a $14 strike and 1-year to expiration. The stock has a continuous dividend yield of 0%, and its current price is $54. Suppose the volatility of the stock is 13%. The continuously compounded risk-free interest rate is 2%. Use a one-period binomial tree to calculate the following: (a) The payoff for up movement. (b) The payoff for down movement. (c) The corresponding replicating portfolio: The number of shares. (d) The corresponding replicating portfolio: The lent/borrowed amount. (e) The option premium. (A) 49.74 (B) 45.74 (C) 46.74 (D) 47.74 (E) 48.74 Problem #1(a): Select Part (a) choices. (A) 32.38 (B) 34.38 (C) 35.38 (D) 33.38 (E) 36.38 Problem #1(b): Select v Part (b) choices. (A) 0.00 (B) 2.00 (C) 4.00 (D) 3.00 (E) 1.00 Problem #1(c): Select v 1 Part (C) choices. (A) -14.72 (B) -17.72 (C) -13.72 (D) -15.72 (E) -16.72 Problem #1(d): Select v 1 Part (d) choices. (A) 41.28 (B) 39.28 (C) 42.28 (D) 40.28 (E) 43.28 Problem #1(e): Select v 1 Part (e) choices. Save Consider a European call option on a stock, with a $14 strike and 1-year to expiration. The stock has a continuous dividend yield of 0%, and its current price is $54. Suppose the volatility of the stock is 13%. The continuously compounded risk-free interest rate is 2%. Use a one-period binomial tree to calculate the following: (a) The payoff for up movement. (b) The payoff for down movement. (c) The corresponding replicating portfolio: The number of shares. (d) The corresponding replicating portfolio: The lent/borrowed amount. (e) The option premium. (A) 49.74 (B) 45.74 (C) 46.74 (D) 47.74 (E) 48.74 Problem #1(a): Select Part (a) choices. (A) 32.38 (B) 34.38 (C) 35.38 (D) 33.38 (E) 36.38 Problem #1(b): Select v Part (b) choices. (A) 0.00 (B) 2.00 (C) 4.00 (D) 3.00 (E) 1.00 Problem #1(c): Select v 1 Part (C) choices. (A) -14.72 (B) -17.72 (C) -13.72 (D) -15.72 (E) -16.72 Problem #1(d): Select v 1 Part (d) choices. (A) 41.28 (B) 39.28 (C) 42.28 (D) 40.28 (E) 43.28 Problem #1(e): Select v 1 Part (e) choices. Save