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 Learn Corp., whose stock is currently trading at $64.00. Suppose you are interested in buying a call option with a strike price of $80.00 that expires in 6 months. (Assume that you get the option for free!) 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 1.80 (u). LC's stock could decline by a factor of 0.70 (d). Therefore, if the option At this time, LC's stock price is out-of-the-money, and if you exercised the option, your payoff would be -$19.50 is out-of-the-money, you should not exercise the option. $80.00 Calculate the ending stock price of Learn Corp. for both possible outcomes and the payoff in both situations. -$8.50 -$19.50 Price Increases Price Decreases -$16.00 Stock price P(u) Stock price P(d) Payoff Cu Payoff Cd 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 portfolio and assuming 365 day-based compounding, complete the following steps to find the value of the call option. Step 1: The total number of shares of LC's stock in the portfolio is (rounded to four decimal places). Step 2: The payoff from the portfolio if the stock is down is $ (rounded to four decimal places). (rounded to four decimal Step 3: If the annual risk-free rate is 4%, the current value of the portfolio if the stock is down will be $ places) Step 4: The current value of the option the stock is down is $ (rounded to four decimal places)