Consider the discrete binomial option-pricing model. The price of the underlving asset is 50 dollars and the call option has an exercise price of 48 dollars. The risk free rate is 5%, and the price of the underlying asset could go up by 10% or go down by 10%. Consider the continuous return process. 5. Now suppose you are pricing a two-year European call and put option. Complete the following b. ii. Probabilities To iii. Explain the value of I at To in probability chart in ii. The 2-year call option price is The 2-year put option price is iv. v. Consider the 1-year and 2-year call prices that you have calculated. Is the 1-year pric less than the 2-year price? Explain. c. Volatility can be defined as (circle one) The standard deviation of the return, measured with continuous compounding, in or year The variance of the return, measured with continuous compounding, in one year The standard deviation of the stock price in one year