Matt is interested in buying a European call option written on Air France SA, a non-dividend-paying equity, with a strike price of 110 and one year until expiration. Currently, Air Frances equity sells for 100 per share. In one year, Matt knows Air Frances shares will be trading at either 120 per share or 90 per share. Matt is able to borrow and lend at the risk-free EAR of 10 percent.

(a) What should the call option sell for today if using risk-neutral valuation?

(b) If no options currently trade on the equity, is there a way to create a synthetic call option with identical pay-offs to the call option just described? If there is, how would you do it?