There is a call option and a put option expiring in 1 year. The underlying stock is selling for $100, the strike price is $98. The risk free rate is 2%. You buy the call and you sell the put. The expected price of the stock next year is 110 and the annual standard deviation is 20%.

a) What is the expected return and the standard deviation of your portfolio? Assume the expected stock price for next year is $110.

b) What will be the rate of return if the actual price of the stock at the end of the year is $105.

c) What is the risk-neutral probability and the risk neutral expected stock price for next year?