Question: Problem 5.45 A stock price is currently $100. Over each of the next two six-month periods it is expected to go up by 10% or

Problem 5.45 A stock price is currently $100. Over each of the next two six-month periods it is expected to go up by 10% or down by 10%. The risk free interest rate is 8% per year.

(a) What is the value of a one-year European call option with a strike price of $100?

(b) What is the value of a one-year European put option with a strike price of $100?

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