European options on Orange Conglomerate Co. with an exercise price of $100 and a maturity of one year, are selling for $10.95 if they are calls and $16.19 if they are puts. The one-year riskless interest rate is 5%.

a) What must be the price of Orange Conglomerate stock? [Hint: Your answer should be a number of dollars divisible by 10.]

b) Are the calls in the money or out of the money? By how much? Are the puts in the money or out of the money? By how much?

c) Now suppose that Orange Conglomerate stock follows a binomial model. A year from now the stock will either be up by $k or down by $k (assume that k > 0). Draw an event tree with two states of the world. In your event tree include the two possible values of the stock in terms of k and the two possible payos of the call option in terms of k.

d) What is k? [Hint: your answer should be another number divisible by 10.]