Assume the binomial model framework. Consider the stock price process { : 0 3 } of a non-dividend paying stock. Let 0 = 100 and let the price rise or fall by 10 % at each timestep. The continuously compounded risk-free interest rate is r = 5% per annum. We wish to price a 3-year European put option with the strike price K = 110. You are given the following information: y is the number of shares in the stock. x is the number of units in a risk-free asset. The price of the risk-free asset is 0 = 7 and is expected to increase at a risk-free interest rate per annum. a) Using a 3-step binomial tree, determine the risk-neutral probability q of an up-step. b) Display the price process of the stock on the binomial tree. c) Using a 3-step binomial tree, display the price process of the option on the binomial tree and calculate the premium of the European put option. d) Find the value of the replicating portfolio at the upper node of timestep 1 that can replicate the option at time-step 2.