Q. 1 (Call option, 25 pts). This is a warm-up exercise. Consider a one-period binomial model with initial stock price So = 60, terminal stock price Sr = 80 in the up case, terminal stock price Sr = 45 in the down case, ini- tial bond price Ao = 100, and terminal bond price Az = 120. In this model, the probability that the stock price goes up at terminal time T is p = 0.4. a. (5) Does the model satisfy the principle of no-arbitrage? Consider a call option with strike price K = 60. b. (5) What is a replicating portfolio for this call option? c. (5) What is the price of the option? d. (5) What is the expected return of the option? e. (5) How would your answers to a., b., c., d. change if we had p = 0.6