Question: Problem 2 Suppose that stock price will increase 10% and decrease 10% every year. The stock does not pay dividend and curretly is tradding at

Problem 2 Suppose that stock price will increase 10% and decrease 10% every year. The stock does not pay dividend and curretly is tradding at S = $50. Annual risk-free rate is ty= 2%. a. [3pts) Construct a two-year binomial tree for the value of the stock. b. [3pts) Calculate the value of a European call option on the stock with an exercise price of $52. c. (3pts) Calculate the value of a European put option on the stock with an exercise price of $52. d. lpt Confirm that your solutions for the values of the call and the put satisfy put-call parity

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