The current stock price is $25. It is known that at the end of two months it will be either $26.50 4. The risk free rate interest rate is 10% per annum with continuous compounding a) Consider a two-month European call option with a strike price of $24.5. Write the stock prices and option pay-offs on the following binomial tree (5 points) S b) what position in the stock is necessary to hedge a short position in 1 call option? (aka Delta) (4 points) 7) the : a) 1) Find the value of the call option using no-arbitrage set-up (i.e., use delta you have calculated in part b; Alternative solution will NOT be accepted)? (5 points) The current stock price is $25. It is known that at the end of two months it will be either $26.50 4. The risk free rate interest rate is 10% per annum with continuous compounding a) Consider a two-month European call option with a strike price of $24.5. Write the stock prices and option pay-offs on the following binomial tree (5 points) S b) what position in the stock is necessary to hedge a short position in 1 call option? (aka Delta) (4 points) 7) the : a) 1) Find the value of the call option using no-arbitrage set-up (i.e., use delta you have calculated in part b; Alternative solution will NOT be accepted)? (5 points)