Q 1. A stock selling for $25 today will, in 1 year, be worth either $35 (up by 40%) or $20 (down by 20%). If the interest rate is 8%. This stock does not pay dividend. There is a 1-year European call option on the stock with exercise price $30. What is the value today of the call option? Please use one-period binomial tree model and assume discrete discounting.

Q 2. Suppose there is also a 1-year European put option on the same stock as in Question 2 with exercise price $30. The current stock price is also $25 and the stock price, in 1 year, will be either $35 (up by 40%) or $20 (down by 20%). The interest rate is 8%. This stock does not pay dividend. What is the value of the put option? Please use one-period binomial tree model and assume discrete discounting.

Show that put-call parity holds based on your results from Q1 and Q2.