Suppose that the risk free rate is 5% per year. We wish to value a 2-year American call option with a strike price of $110. The current stock price is $100. Each year, the stock price either increases 10%, or decreases by 5% Here are the steps for you to solve the problem:

a) Construct a two-period binomial tree for the value of the stock.

 b) Calculate the value of the American call option.

c) Write down the put-call parity relationship for this option.

d) What will be the value of the European put option with an exercise price of 110?