Question 1 (15 marks) The price of a stock price is currently $20. It is known that at the end of 6 months it will be either $25 or $16. The risk-free rate of interest with continuous compounding is 8% per annum. a) Calculate the value of a 6-month European call option on the stock with an exercise price of $22 using the no-arbitrage argument. (8 marks) b) Calculate the value of a 6-month European put option with strike price of $18 using only the risk- neutral principle. (7 marks)