Learn Corp. (Ticker: LC), an education technology company, is considered to be one of the least risky companies in the education sector. Investors trade call options for Leam Corp., whose stock is currently trading at $42.00. Suppose you are interested in buying a call option with a strike price of $58.80 that expires in 6 months. (Assume that you get the option for freel) Based on speculations and probability analysis, you compute and collect the following information for your price analysis of the option: - For LC's options, time until expiration ( t ) is taken as 0.50 year ( 6 months/12 months). - LC's stock could go up by a factor of 2.00 (u). - LCs stock could decine by a factor of 0.85 (d). At this time, LC's stock price is , and if you exercised the option, your payoff would be is out-of-the-money, you exercise the option. Calculate the ending stock price of Leam Corp. for both possible outcomes and the payorf in both situations. investors use options and stocks, based on the range in which a stock is likely to go up or go down, to create portfolios that help them generate riskless payoffs. This is called creating a hedge portfolio. Suppose you sell one call option on Learn Corp.'s stock to create a riskless hedged portfolio. Your hedge portfolio will have a certain number of shares and a certain value based on the payoff it generates. Based on your understanding of a hedge portfollo and assuming 365 doy-based compounding, complete the following steps to find the value of the call option. (Hint: Please round alf answers to four decimal ploces.) Step 1 The total number of shares of LCs stock in the portfolio is Step 2: The poyoff from the portfolio if the stock is down is Step 3: if the annual risk-free rate is 3\%, the current value of the portfolio if the stock is down will be Step 4 : The current value of the option if the stock is down is After you find the value of your option, you discuss it with a friend. She says she will use the information you gave her to replicate the option payoffs. This is called a replicating portfolio Based on your understanding of replicating portfolios, is the following statement true or false? The cost of the replicating portfolio will be equal to the value of the call option or else arbitrage will drive the prices to be equal. False True