A stock price is currently $100. Over each of the next two 6-month periods it is expected to go up by 10% or down by 10%. The risk-free interest rate is 8% per annum with continuous compounding.

a.What is the value of a 1-year European call option with a strike price of $100?

b.What is the value of a 1-year European put option with a strike price of $100?

c.Verify that the European call and European put prices satisfy put-call parity.