Q2. A stock selling for $25 today will, in 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. (2 points) Up (percentage of price change) Down (percentage of price change) 40% -20% Initial stock price, S_O interest rate Exercise price Time to maturity-years (T) 25 3% 30 1 Stock price get formula Bond price Call option payoffs Price??? Finding replicating portfolio for the call Coefficients Constant get formula Call Price get formula Q2. A stock selling for $25 today will, in 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. (2 points) Up (percentage of price change) Down (percentage of price change) 40% -20% Initial stock price, S_O interest rate Exercise price Time to maturity-years (T) 25 3% 30 1 Stock price get formula Bond price Call option payoffs Price??? Finding replicating portfolio for the call Coefficients Constant get formula Call Price get formula