Q3. 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. (2 points) Show that put-call parity holds based on your results from Q2 and Q3. (I point) Part 1 Part 2: Verifying the Put-Call Parity get formula Up (percentage of price change) Down (percentage of price change) 40% Call price, C.O PV(exercise),X(1+rT curretn stock price, S o Put price, p. 20% Initial stock price, S 0 nterest rate Exercise price Timeto maturity-years (T) 25 8% 30 Left-hand Side minus Right-hand Side Stock price get formula Bond price Put option payoffs Price??? Finding replicating portfolio for the put Coefficients Constant get formula Put Price Q3. 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. (2 points) Show that put-call parity holds based on your results from Q2 and Q3. (I point) Part 1 Part 2: Verifying the Put-Call Parity get formula Up (percentage of price change) Down (percentage of price change) 40% Call price, C.O PV(exercise),X(1+rT curretn stock price, S o Put price, p. 20% Initial stock price, S 0 nterest rate Exercise price Timeto maturity-years (T) 25 8% 30 Left-hand Side minus Right-hand Side Stock price get formula Bond price Put option payoffs Price??? Finding replicating portfolio for the put Coefficients Constant get formula Put Price