Question 1 Crude oil is currently traded at $63.00 per barrel on the market. The crude oil price is expected to either grow to $75.00 or fall to $51.00 in the next three months. The risk-free interest rate is 1.25% per annum. You are required to value the following two European options written on the crude oil maturing in 3 months: A call option with a strike price of $68.00 A put option with a strike price of $68.00 Required: (a) What should be the price of the call option? (8 marks) (b) What should be the price of the put option? (8 marks) (c) Discuss the risk-neutral valuation principle in option pricing. Explain why this valuation principle can be and is applied while both the stock and the option are risky securities. (250 +20% words approximately). (9 marks) (Total: 25 marks)