You are attempting to value a call option with an exercise price of $$100$ and one year to

expiration. The current price of the underlying stock is $$100,$ and you believe that if the stock

increases in price it will increase by u $=1\mathrm{.}25.$ Otherwise, it will decrease by d $=0\mathrm{.}8.$ The risk$-$

free rate of interest is $8\%.$

a$-$ Draw the call$$s payoff table.

b$-$ Find the hedge ratio $($h$).$

c$-$ Draw the riskless portfolio payoff table at T$=1.$

d$-$ Find the call$$s value at t$=0.$

e$-$ Find the put$$s value $($with same exercise price and maturity$)$ using the put$-$call parity.

f$-$ What would you do if the call$$s market price at t$=0$ was $$15.$ Calculate the arbitrage

profit.