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Q2. Consider a two period Binomial Model. If the Current Stock Price is 50$ and the risk-free rate is 4 %. For each period the stock can up by 15% and Down by 10%. The exercise price of this call option is 48$

D) Find the value of Call at time-period 0 or today using two period binomial model? (15 points)

E) Please show that the dynamic hedge works. Use the value of the portfolio for the two periods to illustrate the concept of risk-neutral pricing? What does investor earn? Use suitable examples.( 30 points)

F) what strategy investor can use if the call is overpriced/underpriced. Develop actual arbitrage strategy for both overpriced and underpriced call. (5 points)