#1: Binomial Option Pricing Model 1. Textbook Example: Using Excel, show the step-by-step process of calculating a call option premium of f = 0.633 (Textbook, p 270) in detail. In doing so, with a timeline (or two dates, April 20, 2022 and July 20, 2022), be specific about i) a covered call portfolio, including composition and position, ii) riskless (or hedge) portfolio and outcome of the portfolio after 3 months on July 20, 2022, iii) hedge ratio, including its calculation and meaning, and iv) arbitrage condition, including calculation based on the idea and its meaning. 2. Now, assume the exercise price (strike price) is $20, not $21. But other data are the same as in part 1). Using Excel, show the step-by-step process of calculating a new call option premium with the exercise price of $20 in detail with a timeline (or two dates). 3. Discuss the difference in premium in parts 1) and part 2).