Question 9 (20 pts)- Interest rates are 0. A stock is priced at $4. In each period the stock can double or half in price. Consider a two-period call option with strike of $3 [4ptsl.a) Compute the price of the call option. Show all calculations including the risk neutral probability.. [4ptsl b) Compute the replicating portfolio at date 0 [4ptsle If the stock goes up, describe the rebalancing process for the hedge position. Be specific. [4ptsl.d) Use the above lattice of option prices to price a one-period compound option, that allows the holder to buy the call option (computed in (a)) for $1.00. [4ptsle) Computer the price of a claim that at date 0 pays out the stock price squared after 2 periods. Question 9 (20 pts)- Interest rates are 0. A stock is priced at $4. In each period the stock can double or half in price. Consider a two-period call option with strike of $3 [4ptsl.a) Compute the price of the call option. Show all calculations including the risk neutral probability.. [4ptsl b) Compute the replicating portfolio at date 0 [4ptsle If the stock goes up, describe the rebalancing process for the hedge position. Be specific. [4ptsl.d) Use the above lattice of option prices to price a one-period compound option, that allows the holder to buy the call option (computed in (a)) for $1.00. [4ptsle) Computer the price of a claim that at date 0 pays out the stock price squared after 2 periods