Please answer 6.2 and 6.3.

Use the diagram below for problems 6.1-6.4. S is a stock with multiperiod binomial tree shown above. The following hold: (i) The stock pays dividends continuously at a rate proportional to its price. The dividend yield is 4%. (ii) Each step in the tree is of one year. (iii) The risk free interest rate is 5% compounded continuously. 90 U d 99 81 uu ud du dd 108.9 89.1 72.9 6.1. You wish to price a year 89-strike European call on this stock. You are going to use a replicating portfolio to price the option. Then: (a) A =? (b) B =? (c) Co=? (d) How would your answers change if the underlying asset were purchased on a futures exchange? 6.2. Suppose that the market price of the call from #6.1(c). is 4.93. Is there an arbitrage opportunity? If not, explain why. If so, construct a portfolio with such an opportunity. (You should use work from #6.1!) 6.3. Suppose that you want to purchase a derivative that pays the square of the difference of the stock price and 86 in 9 months. What does this derivative cost? Use the diagram below for problems 6.1-6.4. S is a stock with multiperiod binomial tree shown above. The following hold: (i) The stock pays dividends continuously at a rate proportional to its price. The dividend yield is 4%. (ii) Each step in the tree is of one year. (iii) The risk free interest rate is 5% compounded continuously. 90 U d 99 81 uu ud du dd 108.9 89.1 72.9 6.1. You wish to price a year 89-strike European call on this stock. You are going to use a replicating portfolio to price the option. Then: (a) A =? (b) B =? (c) Co=? (d) How would your answers change if the underlying asset were purchased on a futures exchange? 6.2. Suppose that the market price of the call from #6.1(c). is 4.93. Is there an arbitrage opportunity? If not, explain why. If so, construct a portfolio with such an opportunity. (You should use work from #6.1!) 6.3. Suppose that you want to purchase a derivative that pays the square of the difference of the stock price and 86 in 9 months. What does this derivative cost