The price of a stock is currently $40. It is known that at the end of one month it will be either $42 or $38. The risk-free interest rate of return is 8%. Assume continuous compounding. Please use the one-period binomial tree model to answer the following questions. You need to set up the one-period binomial tree first, and then find the replicating portfolio by solving the equation system, then find the option price. 2 (a) What is the value of a one-month European call option with a strike price of $39, in an arbitrage-free economy? (b) What is the value of a one-month European put option with a strike price of $39, in an arbitrage-free economy? (c) Verify your answers using put-call parity.