(Binomial Option pricing) Consider a two-period binomial model in which a stock trades currently at $44. The stock price can go up 6% or down 6% each period. The risk free rate is 2% per period. A) Calculate the price of a call option expiring in two periods with an exercise price of $45. B) Calculate the price of a put option expiring in two periods with an exercise price of $45. C) Based on your answer in A), calculate the number of shares of the underlying stock that would be needed at t=0 in the binomial tree to construct a risk-free hedged portfolio which includes 10,000 calls. a) Call Price b) Put Price c) No. of shares at t=0 Show your calculations below: BINOMIAL OPTION PRICING Inputs Stock Price Now $44.00 Up Movement / Period 6% Down Movement / Period 6% Riskfree Rate / Period 2% Exercise Price $45.00 Number of Periods 2 Risk Neutral Probability Now Period 0 1 2 Stock CALL PUT