Question: Hi, I needed help on this question please. 'i. A stock price is currently 50. Over each of the next two 6-month periods, it is

Hi, I needed help on this question please.

'i. A stock price is currently 50. Over each of the next two 6-month periods, it is expected to go up by 10 or down by 10. The riskfree interest rate is 20% per annum with semi- annual compounding. (8) Compute the risk-neutral probabilities and use them to calculate the initial price of a 1-year European call with a strike price of 45. Briefly justify this pricing approach. (b) Calculate the dynamic replicating strategy for this European call

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