Question: please answer with explanations and calculations. thank you. Question 4 [17 marks] Stock ABC is currently priced at $80. Over each of the next two

please answer with explanations and calculations. thank you.

Question 4 [17 marks] Stock ABC is currently priced at $80. Over each of the next two six-month periods it is expected to either go up by 5% or down by 5%. The risk-free interest rate is 6% per annum with annual compounding interest. How would you strategize your hedging of a one-year European call option with a strike price of $70? Explain you answer and present them in a binomial model diagram

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