The current price of KD Industries stock is $20. In the next year the stock price will either go up by 20% or go down by 20%. KD pays no dividends. The one-year risk-free rate is 5% and will remain constant.

i. Using the binomial pricing model, calculate price of a one-year put option on KD stock with a strike price of $20. Make sure to draw a binomial tree with payoffs.

ii. Using risk neutral probabilities, calculate price of a one-year call option on KD stock with a strike price of $20.